In today’s complex world, it’s no longer sufficient to write a will and sign it. A complete estate plan includes several different types of documents, all with specific functions – such as a Financial Power of Attorney, a Healthcare Power of Attorney, a Living Will, and various forms of trusts. Estate planning attorneys counsel their clients to include all of these documents in their estate plan in order to cover all possible contingencies.
But when it comes to trusts, you’ll have a decision to make. There are many different types of trusts that function in different ways. It’s important to understand what they do so that you can choose which one is best for your particular situation.
Asset protection trusts
This type of trust is beneficial if you have creditors that might try to bring a lawsuit against you to claim your assets. You can use this type of trust to legally protect your hard-earned legacy from creditors for a time while you get your financial affairs in order.
Spendthrift trusts
This type of trust might be necessary if you want to benefit your children or grandchildren, but don’t want them to have complete control over your assets. It will protect your assets from your loved ones’ unwise spending habits, and it will also prevent their spouses or creditors from taking a large chunk of their inheritance from them in the case of a divorce or bankruptcy.
Totten trusts
Also known as Payable On Death trusts, this type of trust is one that you place your assets into while you are still alive. The moment you pass away, all the assets in this trust will pass immediately to your named beneficiary.
The main advantage of this type of trust is that it allows the assets to avoid probate altogether. This will be a blessing to your loved ones that you leave behind because they will not have to pay any of the fees or go through the sometimes complex legal process that probate entails before they receive your intended gifts.
In addition to these, there are many more types of trusts available to you. Your estate planning attorney will be able to explain which types of trusts are best for your situation and help you to make an informed decision for the benefit of your loved ones.