Which Trust is Best For Me?

When it comes to estate planning, trusts are a key component. But which type of trust is right for you? That can be a difficult question to answer since there are many types of trusts and each has its own set of benefits and drawbacks.

Living Trust

A living trust is a type of trust created during the settlor's lifetime (the person who creates the trust). The settlor transfers ownership of their assets to the trustee (the person who manages the trust), which are then held for the benefit of one or more beneficiaries.

The advantages of a living trust are that probate can usually be avoided, and it can provide more control over how your assets are distributed after you pass. For example, you can specify that your assets be distributed to your beneficiaries over time rather than all at once. This can be helpful if you're concerned that your beneficiaries might not be able to handle a large sum of money all at once.

On the other hand, a disadvantage of a living trust is that it can be more difficult to change after they're created. So if you think there's a chance you might want to make changes to your trust in the future, a living trust might not be the best option.

Revocable Trusts

A revocable trust is a type of trust that can be amended or revoked by the settlor at any time. This means that the settlor has full control over the trust and can change it as they see fit.

An advantage of a revocable trust is that the settlor has a lot of flexibility. If they decide to change the trust, they can do so without going through a lengthy and expensive legal process.

However, a disadvantage is that a revocable trust doesn’t offer much asset protection. If the settlor owes money to creditors or is sued, the assets in the trust could be at risk. Additionally, with a revocable trust, it can be more difficult to transfer ownership of assets to the trust than with other types of trusts. This is because the settlor has to transfer ownership of each asset individually, which can be time-consuming and expensive.

Irrevocable Trusts

An irrevocable trust is a type of trust that cannot be amended or revoked by the settlor. Once the trust is created, the settlor gives up all control over it.

An advantage of an irrevocable trust is that it offers more asset protection than a revocable trust. If the settlor owes money to creditors or is sued, the assets in the trust are safe from seizure. Additionally, an irrevocable trust can be used to avoid estate taxes. When the settlor passes, the assets in the trust are not included in their taxable estate.

Settlors should know, though, that like a living trust, a disadvantage of an irrevocable trust is that it’s much harder to change after they're established.

Charitable Trusts

A charitable trust is a type of trust that is used to donate money or property to a charitable organization. The money or property is held in the trust and then used to support the charity.

Creating this type of trust can provide a tax deduction for the settlor. The deduction amount depends on the type of trust and how it's structured. Another advantage of a charitable trust is that it can be used to support a cause that the settlor cares about. The trust can be structured to provide ongoing support to the charity or it can be used to fund a specific project.

However, some may choose not to set up a charitable trust because it can be more expensive than other types of trusts.

Trusts Set Up for Those with Special Needs

A trust set up for someone with special needs is a type of trust that is used to provide financial support for someone with a disability. The money in the trust can be used to pay for things like medical expenses, housing, and education.

The main advantage of a trust set up for someone with special needs is that it can provide financial security for the beneficiary. Funds from this type of trust can be used to cover expenses that would otherwise be difficult or impossible to pay for. Additionally, this type of trust can be used to protect government benefits.

Pet Trusts

A pet trust is a type of trust that is used to provide financial support for a pet. The money in the trust can be used to pay for things like food, medical care, and housing. The trust can be set up so that the pet will go to a new owner or it can be used to pay for someone to take care of the pet.

Asset Protection Trusts

An asset protection trust is a type of trust that is used to protect assets from creditors. The assets in the trust are not available to creditors and they can't be seized if the settlor is sued.

How Kirschner Rychlick PLLC Can Help

If you want more information or advice about setting up a trust or making any adjustments to your estate plan, reach out to Kirschner Rychlick PLLC. We can help you decide which type of trust is best for you and can help you set up the trust. Contact our office online or by phone to get started. (206) 203-8802