As you get older and work on your estate plan, one of the things you may want to set up is a trust. A trust can come in one of many forms, so the exact way it works will depend on the kind you select.
Still, there are some things that trusts have in common. To start with, trusts are set up by you, the grantor or trustor, and will hold assets that you plan to pass on to others.
What happens when you set up a trust?
When you put together a trust, the first thing to know is that your assets will be taken out of your estate. While you’re going to physically hold them, the trust technically holds them in its name until ownership can be passed to your beneficiaries.
The trustee is required to follow specific guidelines and rules that you establish, and they will pass on the income or assets at the time that you set.
What are the main kinds of trusts?
There are two primary categories of trusts. The first category includes revocable trusts, which are trusts that you can revoke or change at any time. Irrevocable trusts are the second category. Like the name suggests, you cannot change these trusts or end them later if you decide you don’t like them as they are.
Some additional types of trusts include:
- Domestic asset protection trusts
- Charitable trusts
- Special needs trusts
- Qualified terminal interest property trusts
- Qualified personal residence trusts
These and other forms of trusts can be used to pass on assets to your loved ones but may also provide you with some helpful protections to keep you and your assets safer as you age.
What kind of trust is the right one for you?
There’s no simple way to determine which kind of trust is the right choice for you, since no single solution fits everyone’s needs. You will need to discuss your circumstances with your attorney and learn more about the different kinds of trusts before you select the one you’d like to use to protect your assets and your beneficiaries.