Estate planning is an important aspect of ensuring that your loved ones and cherished causes are taken care of after you pass away. Failing to do so can result in your beneficiaries facing various challenges, such as difficulty settling your affairs, hefty estate taxes, and having to deal with probate court during their grieving process.
One potential solution to avoid these issues is to establish a trust. Trusts can benefit both you and your heirs, regardless of the amount of assets you plan to leave behind. Here are five types of trusts to consider:
Living Trust
A trust established during the trustor’s lifetime that may help avoid probate, provided it is funded.
Revocable Trust
A trust that can be modified during the trustor’s lifetime and becomes irrevocable upon their death. Many trusts designed to avoid probate fall under this category.
Irrevocable Trust
A trust that requires beneficiary approval to change or amend. The trustor gives up ownership rights of their assets and places them in the trust. Funding the trust during the trustor’s lifetime may help avoid probate, and it may also provide creditor protections.
Totten Trust
A bank account with a named beneficiary. The remaining funds in the account go to the beneficiary upon the account owner’s death. It’s possible to change the heir as often as desired, but the person named on the account at the time of death receives everything left in the account.
Credit Shelter Trust
A trust that may benefit married couples with large estates. The trustor’s share of assets goes into the trust, leaving the surviving spouse as the beneficiary. This type of trust should be living and funded to avoid probate.
In conclusion, establishing a trust can provide comfort and help ensure that your assets are distributed according to your wishes. For more information on trusts and their role in estate planning, consider speaking to a financial professional.
