A trust can play a prominent role in estate planning, but many people do not know much about trusts. A trust is set up by the grantor, also referred to as the “settlor” or “creator,” of the trust. It is then funded by transferring property into the trust. The property and assets held in the trust are referred to as the “corpus” or “principal” of the trust. The trust is then managed by the named trustee for the benefit of the named beneficiaries. A trust can be very useful in avoiding estate taxes. It can also be useful in helping to ensure a smooth and timely transfer of property to a person’s heirs. Furthermore, it can accomplish more specific goals, such as protecting money from spendthrift heirs and creditors, and can also provide for special needs loved ones without jeopardizing their eligibility for government benefits.
What are the Different Types of Trusts?
There are a number of different trust types. The two main categories of trusts are irrevocable and revocable. These types of trusts have key differences:
- An irrevocable trust cannot be altered, amended, or revoked except in the event that all beneficiaries agree to the change or revocation of the trust which is not necessarily very likely to happen.
- A revocable trust can be altered, amended, or revoked at any time.
While it may seem that a revocable trust has all the advantages as it is so flexible, an irrevocable trust trades off flexibility for other advantages that can vary depending on the specifics of the trust.
Special Needs Trusts
A special needs trust, for example, is a type of irrevocable trust. The fact that it is irrevocable and the beneficiary has no say in the management of or distribution of trust assets is crucial to the success of the trust in accomplishing its intended goal. A special needs trust is established for the benefit of a beneficiary with special needs. Loved ones of a special needs individual may worry about his or her financial well-being. At the same time, however, providing financial support to a person with special needs can jeopardize eligibility for critical public benefits. A special needs trust allows for financial support for a person with special needs, but the assets and resources held in the trust are not counted towards the government benefit calculation as the trust is considered to have full ownership over the assets, not the person with special needs.
Charitable Trusts
Another type of trust is a charitable trust. A charitable trust holds assets for the benefit of a charitable organization. A charitable trust can be a great way to save on taxes and, at the same time, provide a way to smoothly transfer resources for the benefit of a favorite charity. Sometimes, a charitable trust is structured as a testamentary trust. A testamentary trust is one established by a will upon the passing of the testator.
Contact a Florida Estate Planning Attorney
The variety of trusts out there can be overwhelming but can be manageable under the counsel of a trusted estate planning attorney. At Verras Law, we are here to answer your questions. We are here to provide you with reliable estate planning legal counsel. Contact Verras Law today.