Estate planning is not a quick process. There are many details that need to be addressed to ensure your wishes are observed after your passing and your assets are distributed how you want. Many people choose to set up a trust for their assets after their passing because it has several advantages over a will, but not all trusts are created equal.
Here are seven types of trusts you need to know about for estate planning:
- Revocable trusts – also called living trusts, these trusts can be changed or completed revoked by the trustmaker during his or her lifetime. These types of trusts can be helpful in avoiding costly probate proceedings, but do not protect the assets from creditors.
- Irrevocable trusts – these trusts cannot be altered in any way or revoked after their creation, even by the trustmaker. Because they cannot be modified, it is important to use irrevocable trusts wisely. There may be better estate planning options that are more suitable for your needs.
- Charitable trusts – for individuals who would like to give to charity after their passing, charitable trusts provide a way to benefit a charity while protecting the assets from estate and gift taxes.
- Special needs trusts – By setting up a special needs trust, an individual can ensure the beneficiary will receive the assets in the trust without making the beneficiary ineligible to receive government benefits like Social Security. The trust can provide the beneficiary with items not provided by government benefits, thereby ensuring the beneficiary will always be taken care of financially.
- Tax bypass trusts – this type of irrevocable trust allows the creator to leave assets to his or her spouse, children, or other designated heir, while limiting the number of assets subject to estate tax.
- Totten trusts – A Totten trust is one where the creator deposits money into a bank account during his or her lifetime as the trustee of the trust. This is a revocable trust, and both individuals and entities can be named as the beneficiary. When the creator and trustee passes away, the assets can pass to the beneficiaries while avoiding probate. However, a Totten trust cannot be used to transfer real property.
- Spendthrift trusts – any type of trust that does not allow the beneficiary to sell or pledge away assets in the trust is called a spendthrift trust. This also protects the assets in the trust from the beneficiary’s creditors.
Hensley Krueger LLP Can Help With Your Houston Estate Planning
If you are interested in setting up a trust, you will need the help of an experienced Houston, Texas estate planning attorney. Hensley Krueger LLP can analyze your needs and help you determine the best type of trust. Contact us today to schedule a consultation.