Estate planning is critical for anyone who hopes to pass assets to beneficiaries. Without an estate plan, one's possessions and cash may be distributed in a fashion that doesn't suit their desires. Yet, even those who know this truth find it difficult to proceed with planning. One reason is that they are afraid to think about passing on, but another reasons is because they are unfamiliar with what makes up an estate plan and how it can prove beneficial. This week we will look at trusts as part of the estate plan.
There are many types of trusts that one can create. First, though, it is important to understand the purpose of a trust. A trust allows an individual to decide who will benefit from their assets while making those benefits subject to certain rules. A trustee oversees a trust for the benefit of a beneficiary. One of the most common types of trusts is the revocable. This trust is created during an individual's life and, as such, it can be changed or eliminated at any time. One benefit of this kind of trust is that it allows those involved to avoid probate, which can be lengthy and costly to an estate. Despite this benefit, though, a revocable trust is not the best way to protect assets from creditors.
An asset protection trust, which is often set up overseas, can protect assets from future creditors. Here, the assets don't necessarily have to be moved to another country, but the trust is irrevocable for a period of time. Additionally, the trust maker cannot be the trust's beneficiary. Other trusts include the charitable trust, constructive trust, special needs trust, and the spendthrift trust. Each of these trust types have particular purposes and benefits which will be discussed in another post on our blog.
Those individuals who are thinking about how best to protect their assets and provide for their beneficiaries may want to consider one or a number of trusts. To learn more about these estate planning tools and how to validly create them, an individual may want to speak with an experienced legal professional.