What are the Most Common Types of Trusts?
Trusts are an integral part of estate planning for many individuals. Understanding the most common types of trusts offers insight into how these tools can be used to provide for future generations.
Revocable Trusts
With a revocable trust, the person who creates the trusts retains full control over the assets therein. He or she has complete freedom to change or cancel the trust. A revocable trust is sometimes called a “living trust.” This structure is often used to avoid probate, which can cause a lengthy delay of settling the individual’s estate. However, assets held within the trust are available to the creator’s creditors, if any.
Irrevocable Trusts
Irrevocable trusts transfer the assets to the trust beneficiary and cannot be controlled or revoked by the creator. One type of irrevocable trust, a life insurance trust, provides tax advantages when created to hold life insurance proceeds.
Minor Trusts
These trust funds are commonly established to save money for children and grandchildren. When the beneficiaries of the trust reach a certain age, they are often given the funds to use as they please.
Spendthrift Trust
This form of trust is managed by an independent trustee. He or she has the final say in how the funds are spent. This structure could be used to provide for a minor child without giving the child full control, for example.
Special Needs Trusts
An individual who is disabled or has special needs may rely on government benefits. A special needs trust allows this person to benefit from a loved one’s estate without losing government assistance.
Marital Trust
This type of trust is designed to protect assets and can be used to benefit from estate planning tax guidelines. When one spouse passes away, the other spouse receives the marital trust. Any remaining assets pass to children or other beneficiaries after the second spouse passes.
Rhode Island residents can rely on The Law Offices of Stephen P. Levesque for their estate planning needs. We can help create trusts and manage wills to ensure that an individual’s estate is administered in accordance with his or her wishes. Call (401) 490-4900 or contact us online to schedule a consultation.