Every family is different, which means every family needs a different type of estate plan. Estate plans can contain a large variety of documents and instruments to help you achieve the vision you have for your family’s future financial security. Trusts can often be an essential tool to help create the perfect estate plan. There are a wide variety of trusts that you can use and it is important to consider the possibilities for each.
One type of trust is called a “testamentary trust.” Testamentary trusts are those that are created through your Last Will and Testament or otherwise only come into being at the time of your death. One advantage to this type of trust is that you are still free to do what you like with the assets during your lifetime. However, a large disadvantage is that this type of trust will not avoid probate, which is a large advantage of most other trusts.
Living trusts, or revocable trusts, are trusts that you create during your lifetime. With a living trust, the assets still belong to the trust creator. You can change or even completely eliminate the trust at any time, which is a large benefit. A downside to a living trust, however, is that the income from the trust is still the income of the trust’s creator for purposes of income taxes. Moreover, the assets in the trust can still be reached or even seized by any creditors of the trust’s creator.
Irrevocable trusts provide much more protection for the assets inside. Once the trust is created, the assets no longer belong to the trust’s creator, but rather to the trust itself. Accordingly, creditors can no longer seize those assets and the income is not income to the trust’s creator. However, as the name suggests, once the trust is created, it is permanent.
There are also a variety of special interest trusts. For example, gun trusts allow firearms enthusiasts to place firearms into a trust, allowing the trust creator and the beneficiaries to all use and possess particular firearms without having to do the paperwork or pay transfer fees required by federal law. Similarly, if your family owns a vacation home or cabin, a cabin trust can help ease family tension over the use, upkeep, or sale of the cabin later on.
We have extensive experience in assisting our clients with selecting the right type of trust to suit their needs. Call us today at (320) 299-4249 to talk about your assets and your goals.