When beginning the estate planning process, many people believe they only need to create a will to achieve their financial goals. For some, this may be enough to protect their assets and give them peace of mind. But that’s not always the case. Those with specific objectives or complex assets may want to consider adding a trust to their estate plan.
Common types of trusts
Trusts come in all shapes and sizes, and they each provide their own unique benefits. Some common types of trusts to consider creating are:
- Living trusts
- Testamentary trusts, and
- Supplemental needs trusts
Living trusts, unsurprisingly, are set up while a person, or settlor, is still living. Assets placed into this type of trust will be passed directly to loved ones after the settlor passes. Living trusts also protect a person’s property from having to pass through the probate process. This allows families to save time and money while keeping their estates out of the public record.
Trusts that are included in a person’s last will and testament are known as testamentary trusts. This type of trust does not take effect until after a person passes away. This gives people the ability to maintain control over their assets while they are still alive. However, because testamentary trusts are included in the settlor’s will, they must pass through probate. This process can be time-consuming and can leave families exposed to estate taxes.
Families who have loved ones with special needs may want to consider adding a supplemental needs trust to their estate plan. Supplemental needs trusts allow parents or family members to leave an inheritance for a special needs child while still maintaining their eligibility for government benefits.
Trusts are an often-underutilized financial tool that provide countless benefits to families looking to plan for the future. With so many available options, deciding which type of trust to establish can be challenging. You can gain some reassurance and feel confident about your financial plans, however, by seeking out the guidance of a knowledgeable attorney.