To avoid probate, estate taxes and disputes, a trust can be added to an estate plan. A trust allows a grantor to entrust assets to a trustee who is responsible for managing the assets until they are distributed to beneficiaries.
There are many different kinds of trusts with unique legal wordage. Here’s what you should know about a few common kinds of trusts:
Revocable trust
A revocable trust is a common document added to estate plans. A revocable trust allows a grantor to add or remove assets or beneficiaries at any time. Once the grantor passes away, the trust becomes irrevocable.
Pet trust
A grantor can place assets in a trust for the benefit of their pets. Assets in a pet trust can be used for grooming, food, vet bills or any other financial expenses.
Incentive trust
A beneficiary can be required to meet certain conditions before they can take assets from an incentive trust. For example, assets in an incentive trust may only be used if the beneficiary goes to college.
Charitable trust
Assets may be placed in a charitable trust to be used on private organizations, research programs or other charitable groups. These assets can be dispersed at regular intervals.
Spendthrift trust
If a beneficiary has poor spending habits, a spendthrift trust can be used to limit how many assets they can use at any time.
Special needs trust
A beneficiary who receives supplemental income or disability benefits may lose these benefits if they gain assets from a trust. However, a special needs trust can limit a beneficiary’s access to trusts so they can keep their benefits.
You may need to reach out for legal help to learn more about your trust options.