Common Types of Trusts
Caitlyn Ashley Law in Denton, Texas, will counsel you on which documents are right for your needs and ensure they are flexible enough to meet your changing needs for years to come.
As we learned in a previous blog post, a Trust is an estate planning document that lets you decide how you want your property, money, etc., divided and transferred to your beneficiaries. Unlike a Will, which only kicks in when you die, a Trust can be created and managed during your lifetime and subsequently managed by a successor trustee when you can no longer act. Once assets are put into the Trust, they belong to the Trust and are subject to the rules and instructions you laid out.
While all of that may sound complex, Trusts are a valuable tool and beneficial for many reasons. Perhaps the biggest reason is that there are different types that not only cater to your needs and wishes but can be crafted for specific purposes.
While not an exhaustive list, below are just a few of the more common types of Trusts we create at Caitlyn Ashley Law:
Revocable Trusts — Allows you to control all assets held in the Trust and make changes during your lifetime — including dissolving the Trust at your discretion. You can name a successor trustee to take over for you without the threat of court involvement if you become incapacitated. The same is true when passing assets to your beneficiaries when you die.
Irrevocable Trusts — These Trusts cannot be modified, altered, or terminated by you in any way. You appoint someone else to be in control even while you are still alive and could theoretically make decisions for yourself. There are many distinct advantages, including that the assets in the Trust are protected from long-term care expenses, creditors, and lawsuits. There can also be tax advantages to irrevocable trusts.
Special Needs Trust — These Trusts help families who care for an individual (ex: a child) with special needs or disabilities and want to ensure they can receive assets from the Trust to pay for future care and services that government benefits may not already cover. Examples include therapy, education, housing, special equipment, and additional medical care. This Trust also ensures eligibility for government programs and benefits isn’t threatened in any way.
Generation-Skipping Trusts — A unique Trust that allows most assets to go to a trustor’s grandchildren rather than their children, thus “skipping” a generation. The benefit with these Trusts is that your children can avoid estate taxes that would apply if they directly inherited the assets upon your death.
Charitable Trusts — As the name implies, these Trusts are established with the sole intention of benefiting a charity. A benefit is that you can lower or avoid estate and gift taxes.
Legacy Trusts — Many people leave everything in a Trust to their children. But if something were to ever happen to your children, or they were to get divorced, you run the risk of that money possibly ending up with someone outside your family, including a future spouse and their children. A Legacy Trust limits money so it can only be passed down to your family.
QTIP Trusts — A Qualified Terminal Interest Property Trust postpones estate tax payments until the death of the second spouse. Keep in mind that these taxes may be higher after the second death.
Incentive Trusts — These Trusts include provisions or requirements that reward beneficiaries for certain behaviors, such as career milestones, graduating from college, having a family, or starting a business. Essentially, the beneficiary receives funds from the Trust provided that they meet or exceed certain conditions.
Spendthrift Trusts — These Trusts are great in situations where a beneficiary is either too young to properly manage an excessive windfall of inheritance money or is older but has proven to be financially irresponsible. They will not have direct access to the assets or the funds and will only receive access as the trustee sees fit.
Call Caitlyn Ashley Law today!
Having a plan for the future is the most important gift you can give yourself and your family. Granted, none of us will ever know for sure what is around every corner. And thinking about the what-ifs can be overwhelming. But having a plan that accounts for your family’s unique circumstances, puts your affairs in order, offers solutions, lays out your wishes and goals, and protects your family’s future provides peace of mind for the road ahead.
Caitlyn Ashley Law in Denton, Texas, will counsel you on which documents best suit your needs and ensure they are flexible enough to meet your changing needs for years to come.