One of the main goals of estate planning law services is to avoid sending your estate -- or the majority of it -- through probate once you are gone. That way, the vast majority of the wealth you accumulated during your lifetime will pass directly to your heirs, instead of being eaten up in taxes and fees by the state.
Trusts are one of the main ways that you can avoid probate. In addition, they offer another unique benefit over wills: They're entirely private. A will is a matter of public record. Many people prefer to keep the details of their families' financial lives away from prying eyes -- which a trust can help accomplish.
What kinds of trusts are there?
Trusts are all divided into two categories. Revocable trusts, which are also called living trusts, can be modified or even revoked so long as the grantor of the trust is alive. Irrevocable trusts, on the other hand, cannot be changed or revoked once they are established. Of the two, irrevocable trusts offer the most secure protection for your wealth -- but they need to be planned out very carefully because of the fact that they cannot be altered after their creation.
What are some of the subcategories of trusts?
There are a number of different types of trusts that fall under the revocable or irrevocable umbrella -- each with their own unique limitations, benefits, and purposes. Some of the most popular types include:
- Asset Protection Trusts -- These often straddle the line between irrevocable and revocable. Often held in offshore accounts, they are usually irrevocable for a number of years -- but frequently revert to the grantor after a period of time. Their main purpose is to protect wealth from creditor's claims.
- Special Needs Trusts -- These are used to provide for someone who is disabled and receiving government benefits, like SSI, SSDI, Medicare, and Medicaid. Their purpose is to make the disabled person's life more comfortable without affecting their eligibility for the government benefits.
- Tax By-Pass Trusts -- These enable wealthy couples to pass money to their children upon their death without incurring the massive tax rate that is otherwise imposed on large estates.
- Spendthrift Trusts -- These trusts prevent a beneficiary from running through the money in the trust too quickly and protect a beneficiary from creditors. They're particularly useful when a beneficiary is financially naive, has a gambling problem, or is simply not good at budgeting.
- Charitable Trusts -- These are partially tools to lower the taxes on a gift and partially something that people can use to benefit a favorite charity, an institution of learning, or something similar.
If you're interested in learning how a trust can help with your goals, estate planning law services can guide you. Check out a company like Davis & Mathis for more information on what might be best for you.