Wading Through the World of Trusts – How do Various Trusts Differ?
What are Trusts?
Creating a trust with the help of an estate planning lawyer is a perfect way to kick off your estate plan, especially if you’re looking for a relatively easy, nearly full-proof way to pass on your wealth to your descendants and loved ones. Trusts are generally three-party agreements existing between a trustor (the person allocating his assets into the trust), the trustee (the person tasked with managing the trust), and the beneficiary (the person who receives the trust’s benefits). Though these are three distinct roles, a trust can be created with a minimum of two people, as it is possible for one person to take on two roles. Trusts are often considered advantageous over wills because they do not have to go through probate, which is the often lengthy and costly process that a will must go through following the benefactor’s death. As you go forward with making a trust, it’s important to keep in mind that they are not “one-size-fits-all” estate planning instruments; rather, there are various types of trusts, all suited for specific financial situations and equipped with unique benefits.
What are Some Common Trusts?
The two most common trusts are Revocable and Irrevocable Trusts. Revocable Trusts allow you to place your assets into a trust and then change its conditions as you please or as your circumstances change. An Irrevocable Trust, on the other hand, effectively strips away your asset ownership rights as the trustor, and prohibits you from making any changes to the terms of the trust without the express permission of the beneficiary. An Irrevocable Trust is therefore a good method of asset protection, as it can withstand most claims made by creditors against the trustor.
What Type of Trusts Can Help Me Receive Public Assistance?
If you’re looking to apply for Medicaid or other similar public assistance programs, there are certain types of trusts that can help you become eligible. A popular trust of this type is a Pooled Income Trust, which allows you to receive public assistance benefits in addition to a steady monthly income from your trust to supplement any additional living expenses. There are also two common trusts used for people with special needs to qualify for public assistance benefits while still holding on to their assets. The first of these, called a First-Party Special Needs Trust, is reserved for special needs individuals with wealth of their own, as the assets used to fund the trust must come from the beneficiary himself (hence the “first-party” designation). The other type is the Third-Party Supplemental Needs Trust, which uses assets from a “third-party” donor, usually a family member, to fund the trust to the benefit of the special needs beneficiary; this trust is considered to advantageous over the First-Party Special Needs Trust or the Pooled Income Trust because it does not require that the government be reimbursed for Medicaid payments made on behalf of the beneficiary upon his death.
What Should I Do If I Want to Set Up A Trust?
All in all, picking the proper trust to suit your needs and circumstances is a tricky matter that should only be entrusted to a well-experienced estate-planning attorney. Contact one today and get started on ensuring that your hard-earned wealth can be properly passed down to your loved ones.