In your estate plan, you have the option to create one or more trusts. A trust can provide you with more control over how your estate is distributed after you pass away than if you only have a will. Likewise, a trust can protect your estate from facing estate taxes, disputes and probate.
A trust works by having a grantor entrust assets to a trustee. The trustee is then responsible for distributing these assets to beneficiaries as instructed. There are many kinds of trusts to choose from. Here are four that are used often.
If you have a beneficiary to whom you wish to give assets after you pass away, but you’re afraid they may use their inheritance unwisely, then you could create a spendthrift trust. This trust limits how much a beneficiary has access to at one time so that they can still live comfortably without wasting their inheritance.
You may have greatly benefited from or endorsed a charity or community that you wish to give back to. A charitable trust can be made so that a portion of your assets are given to a charity, organization or research program after you pass away.
You can do more with a trust than give to your immediate family. You can create a generation-skipping trust (GST) that skips your children in favor of your grandchildren.
An incentive trust allows you to set certain parameters that your beneficiaries must meet before they gain any inheritance. For example, you could make it so that your assets can only be used for your beneficiary’s education, such as tuition payments, books, housing and supplies.
If you’re looking into trusts and estate planning, then it may help to reach out for legal help to learn more.