A trust is a legal document that establishes a fiduciary relationship with one individual, known as a trustee. The trustor (the person issuing the document) gives the trustee the right to hold title to property or assets for the benefit of a third party, the beneficiary. The trustee is supposed to protect the trustor’s assets and make sure that they are distributed according to the trustor’s wishes.
For example, if you create a trust, you can choose your spouse to be your trustee. Your spouse would then hold title to your property and assets and would oversee distributing your assets seamlessly after you pass. A trust can be extremely beneficial because it can help families save time, reduce paperwork, and avoid estate taxes.
Different Types of Trusts
Living Trusts or Revocable Trust
A living trust is a legal relationship in which the title to property is entrusted to a person (or legal entity) for them to hold and use for another person’s benefit. A living or revocable trust can help you transfer the title of a property to a trust.
For example, if you create a living trust for your business and assign your son or daughter as a trustee, you will still have complete control over your business, but it would pass on to your son or daughter after you pass away. You would still have the power to change or revoke the trust at any time.
Although it is useful to avoid probate, it is important to note that a revocable trust becomes an irrevocable trust when the trustor passes away.
An irrevocable trust is one that cannot be altered or changed after it’s been created. It means that once a property or asset is transferred to an irrevocable trust, no one, not even the person who created the trust, can modify it.
Individuals often get an irrevocable trust when they want to minimize estate taxes, become eligible for government programs, or protect assets from creditors. An experienced attorney can help you determine if an irrevocable trust would be beneficial to your estate plan.
A charitable trust is a trust created to benefit a particular charity organization. A charitable trust can help an estate plan avoid the imposition of estate and gift tax.
A testamentary trust is created by a will after an individual passes away. The goal of a testamentary trust is to preserve assets for children from a previous marriage, protect a spouse’s financial future by providing lifelong income, gifting to charity, or ensuring that beneficiaries with special needs are protected.
How Do I Know Which Trust to Create?
Above we’ve listed some of the most common trusts, but there are many others that can help you protect your assets and your loved ones according to your unique situation. If you don’t know which trust is right for your estate plan, our team at Hurtik Law & Associates is here to help you.
Contact us today at (702) 323-5750 to schedule a free case consultation!