A trust is a legal document that allocates assets to a trustee. Per the instructions of the trust, the trustee will distribute assets to beneficiaries. Trusts are often highly flexible and act much like wills. But, a trust has the added advantage of circumventing probate and estate taxes.
Did you know there are different kinds of trusts? Here are a few you can consider drafting:
1. Revocable trust
Many people make revocable trusts during their lifetime. A revocable trust can be modified at any time or entirely revoked. This trust can be distributed immediately and minimizes estate taxes. Testators often make pour-over wills to transfer assets into the trust once the testator dies. Once the testator passes away, the revocable trust becomes irrevocable.
2. Irrevocable trust
People can make irrevocable trusts while they’re alive or, as stated above, a revocable trust becomes an irrevocable trust upon the testator’s death. An irrevocable trust can’t be altered. A testator can’t remove assets from an irrevocable trust once the transfer is done. But, a beneficiary could give permission to revoke an irrevocable trust.
3. Pet trusts
Many people outlive their animals. As a result, many people create pet trusts to help ensure their pets are cared for after the testator passes away. A pet doesn’t literally inherit the assets. Instead, financial support is put aside for the care of the pet.
4. Charitable trusts
Some people wish to leave their assets to charity, which is possible with a charity trust. A charitable trust can be made to give a nonprofit some or all of an estate, which can lead to a lasting legacy for you.
Which trust should you make?
Every trust is unique and there are many more than the four mentioned above. The circumstances of your life may dictate which one will best accomplish your goals. By learning your legal options, you can learn what trust is best for your needs.