Types of Trusts and Their Benefits

Trusts are powerful financial planning tools that offer various benefits for asset management, estate planning, and wealth transfer. Several types of trusts serve specific purposes and provide unique advantages. Here's an overview of the main types of trusts and their benefits:

Differences between Trust Types

Living trusts (inter vivos trusts) are created and become active during the grantor's lifetime. Assets in these trusts bypass the probate process, saving time and money. Unlike wills, living trusts are not public records, maintaining confidentiality for the estate.

Testamentary trusts, on the other hand, are created after the grantor's death according to their will. They allow the grantor to dictate asset distribution even after death.

Revocable trusts can be altered or revoked by the grantor at any time, offering flexibility since the grantor retains control over assets and can make changes as needed.

Irrevocable trusts cannot be changed or revoked after the grantor establishes them. Assets in an irrevocable trust may not be subject to estate taxes and can shield assets from creditors and legal claims.

Specialized Trusts

Charitable trusts benefit charitable organizations while offering tax advantages to the grantor. They provide income to a charity for a set period before distributing the remaining assets to beneficiaries.

Special needs trusts provide for individuals with disabilities without compromising their eligibility for government benefits. 

Asset protection trusts shield assets from potential legal claims while keeping the ownership details confidential.

Choosing the Right Trust

Choosing a trust begins with several considerations, the most important being determining the trust's purpose. Are you looking for asset protection, tax planning, or managing assets for your beneficiaries? Evaluate the types of trusts available, such as revocable, irrevocable, or testamentary, and consider how each aligns with your needs. Assess the tax implications and costs of setting up and maintaining the trust. Consult with an estate planning attorney to ensure compliance with legal requirements and understand each option's implications.

Consider the beneficiaries' circumstances and any specific conditions you want to include. Finally, select a trustworthy trustee who will manage the trust according to your wishes. Each decision should align with your overall estate planning goals and personal circumstances.

Estate Planning Integration

A trust is a fundamental component of estate planning, offering flexibility and control over asset distribution. It allows individuals to dictate precisely how and when their assets are transferred to beneficiaries, often reducing probate delays and associated costs.

Trusts can provide tax benefits and protect assets from creditors or lawsuits. They can meet specific goals, such as ensuring funds are available for education, medical expenses, or managing assets for minors.

Also, trusts maintain privacy, unlike wills, which become public records. By appointing a reliable trustee to manage the trust, individuals ensure their estate is preserved and allocated according to their wishes, enhancing overall estate planning strategies.

We Can Help You Choose the Right Trust

Eliminate undue stress and expenses for your family when you pass away or become incapacitated. Trusts and estate planning will make things easier for your family while ensuring your wishes are followed.

Don’t wait! Talk to one of the experienced estate planning attorneys at Bingaman Hess today at 610.374.8377 or contact us online.

This article is for informational purposes only and does not constitute legal advice. No one may rely on this information without consulting an attorney. Anyone who attempts to use this information without attorney consultation does so at their own risk. Bingaman Hess is not and shall never be responsible for anyone who uses this information. It is not legal advice.