Many people often only include a will in their estate plan. This has the benefit of helping to ensure an estate is managed according to the testator’s last wishes. However, a will is often not as secure as a trust.
A trust is a legal arrangement that helps ensure assets are given to beneficiaries without causing probate, disputes or estate taxes. There are many types of trust to know about. Here are some of the options:
6 kinds of trusts
Unlike a will, a trust can be used for many purposes. Here are several common trusts and how they can benefit an estate plan:
- Charitable trust: If a testator wishes to donate to a charity, this is the trust for them. A charitable trust can donate assets to private organizations or nonprofits at regular intervals.
- Incentive trust: A testator can control how their assets are used with this trust. The testator can create clauses that must be met with an incentive trust to help ensure beneficiaries are using assets responsibly.
- Special needs trust: If a beneficiary receives supplemental income or health insurance, then this may be the best trust for them. A special needs trust limits access to trust funds to help ensure a beneficiary keeps their health benefits.
- Generation-skipping trust: To avoid estate taxes, assets can be given to grandchildren with this trust. A generation-skipping trust can be accessed by people 37 ½ years of age younger than the grantor.
- Spendthrift trust: A testator can limit a beneficiary’s access to funds with this trust. A spendthrift trust is often good for beneficiaries who may not be good at making strong investments.
- Pet trust: A testator can use this trust to help their pets. Funds in a pet trust can be used to help ensure a testator’s pets’ basic needs are covered, such as food, shelter, care and vet bills.
If you want to do something special with your estate plan, then you may need to make a trust. You can discuss your trust options with legal help.