By Joseph Hurwitz
In this series, Planning for the Future, I am exploring different topics and methods for Estate Planning. This article’s topic is Trusts. A Trust is the most powerful long-term tool and is a legal entity that owns property in order to accomplish specific goals and outcomes by protecting assets, providing tax benefits and maintaining control over property after death.
The difference between the types of Trusts is based upon when the Trust is created. Inter Vivo Trusts are created by someone during their lifetime, and Testamentary Trusts are created by a Will. The next major division of Trust types is based upon the amount of control a Grantor maintains over the Trust. A Grantor is the creator of a Trust.
A Revocable Trust can be changed by the Grantor any time they wish to do so. The Grantor is considered to be the owner of the Trust’s assets and may have to pay taxes on those assets or earnings. Also, creditors of the Grantor may be able to get control over Trust assets as well. With a Revocable Trust, you are trading the security of asset protection in order to maintain control over the Trust at all times.
An Irrevocable Trust protects assets from a Grantor’s creditors and may also provide tax benefits, but is not easily changed. After the Trust is created, a Grantor must go through several steps and procedures, typically in the court system, in order to make any changes to the Trust. There is no guarantee that any of the changes will be allowed to occur.
Here are two examples of types of Trusts that address common situations. If you want to leave money for a person who is not fiscally responsible, a Spendthrift Trust would prevent the beneficiary from irresponsibly spending or wasting the money or property given to them. For beneficiaries who are getting disability or other benefits, a Special Needs Trust supplements their existing benefits to increase their quality of life while protecting their eligibility to continue receiving their benefits. All other types of Trusts deal with the specific outcome a Grantor is looking to accomplish.
When choosing a Trust you must ask yourself one question. “What am I trying to accomplish?” By answering this question you will get the Trust you need, and the sky is the limit.
This article does not create an attorney-client relationship. This article is not legal advice, and if you have any legal questions or concerns you are encouraged to seek the counsel of a licensed attorney in your area.
Joseph Hurwitz, Attorney at Law – Lake Lure – 828-777-4785