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Horizon Elder Law & Estate Planning Blog

Tuesday, April 17, 2018

What Types of Trusts Are There and How Do I Determine Which One is Right for Me?

Our California wills and trust attorneys utilizes a variety of estate planning documents to meet the needs and goals of our clients. You may recognize some of the documents we use in an estate plan, such as a will, health care directive, or a power of attorney. However, you may not be as familiar with trusts.

Trusts can provide protection for assets and income for heirs for a lifetime. Because there are several types of trusts, you can choose the trust that addresses your specific goals and needs. Our CA wills & trust attorney can review the various trusts and advise which trust is best for your situation.

What Type of Trust Do I Need?

A trust is a fiduciary agreement that appoints a third party, known as a trustee, to hold and manage the assets of the trust. The terms of the trust direct how assets should be distributed to heirs. Because assets within a trust can avoid being subject to a probate estate and trusts allow for more flexibility and control than a will, many people choose a trust to provide for their heirs.

Two trusts that are used by many people are:

  • Revocable Trusts
  • Revocable trusts are often referred to as living trusts because you transfer assets into the trust during your lifetime and you serve as the trustee. A revocable trust may be changed or terminated at your discretion. Upon your death, the assets in the trust are distributed according to the terms you set forth in the trust. While revocable trusts can avoid probate, they do not offer protection from your creditors. It may be more difficult for creditors to access your assets, but it is possible with a revocable trust.
  • Irrevocable Trust
  • An irrevocable trust has the same benefits of a revocable trust; however, you cannot change the terms of the trust nor revoke the trust. Once assets are transferred into the trust, you cannot remove the property from the trust. However, an irrevocable trust does provide much more protection from creditors. Therefore, depending on your situation, an irrevocable trust might be the best choice. You should be absolutely sure before you sign the trust and transfer assets to the trust.

Other Types of Trust Agreements

Depending on your goals, you may choose from a variety of trust agreements. Some of the common trust agreements our CA wills & trusts attorney draft for clients include:

  • IRA Trusts — An IRA trust serves as the beneficiary of your IRA accounts to protect the funds in the IRAs for your heirs.

  • Charitable Trust — Charitable trusts may be established during your lifetime as a financial planning tool or through your estate to lower estate and gift taxes.

  • Special Needs Trust — A special needs trust is established to provide for the care and upkeep of a person with disabilities or special needs. This type of trust is also very useful when a person receives government benefits because it can protect against being disqualified for benefits.

  • Tax-By-Pass Trust — This trust allows a spouse to leave money to another spouse to limit the amount of federal estate tax that would be due when the second spouse dies.

  • Pet Trusts — You cannot leave money or property to your pets. However, you can name a trustee for your pet and leave money and property to the trust for the care and upkeep of your pet after your death.

  • Spendthrift Trust — A spendthrift trust does not permit the beneficiary to pledge, dispose, or sell his or her interest in the trust. It is designed to protect the trust from the beneficiary’s creditors. Once the trust property is disbursed, the beneficiary is free to sell or pledge assets at the beneficiary’s discretion.

Choosing the Right Trust for You

The above list is not an exhaustive list of all trust agreements. There are still more trusts you can choose from to meet your needs. Contact the skilled wills & trusts attorneys at Horizon Law to discuss your specific needs.


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