In an estate plan, the testator typically makes a will. A will is a legal document that outlines how an estate is distributed and who should benefit from it. Unfortunately, a will dispute can put a halt to the deceased’s last wishes. Someone might contest a will claiming it was fraudulent or there was undue influence. Furthermore, a will may face estate taxes and probate.
All of these issues may be circumvented by creating a trust. A trust allows a grantor to remove assets from their estate and place them under a trustee’s direction. The trustee is then responsible for distributing assets to the named beneficiaries. A revocable trust is one of the most common. This trust allows grantors to adjust the terms and assets in a trust. Once the grantor passes away, the revocable trust becomes irrevocable and can’t be altered without the beneficiary’s consent.
A revocable trust isn’t the only option, however. Here are several trusts that might benefit you:
A charitable trust
People who wish to give back to their communities, help fund independent programs or donate to private organizations can create charitable trusts. Charitable trusts can make regular, fixed payments or a percentage of the trust’s principal.
A pet trust
A grantor may realize that their pet will outlive them. A pet trust can help fund the grantor’s pet’s needs. Funds in a pet trust could be used for food, clothing, shelter, grooming, medicine and vet bills.
A special needs trust
An inheritance could negatively impact someone who receives Supplemental Security Income (SSI) or Medicaid and other state benefits. A grantor can make a trust to accommodate these needs by instructing regular payments from a trust at a fixed percentage.
A generation-skipping trust
A grantor may wish to set up a trust that would benefit their grandchildren or great-grandchildren, which could be done with a generation-skipping trust. This trust would bypass one generation for the benefit of a younger one.
Each trust has its own unique benefits that may suit you. When planning an estate, it helps to learn more about your legal options.