Loveland Trust Planning Attorney
There are many different types of trusts, and it can be confusing to try and understand them all. It’s helpful to understand what a trust is, and the different types that exist.
Additionally, knowing the benefits of setting up a trust and how they can help you protect your assets can be very beneficial.
What is a Trust?
A trust is a legal arrangement in which one person (the trustee) holds property for the benefit of another person (the beneficiary). The trustee has a legal duty to manage the trust for the benefit of the beneficiary. Trusts can be created for many different purposes, including the following:
- To provide income for someone during their lifetime
- To protect assets from creditors or bankruptcy
- To reduce estate taxes
- To avoid probate
- To control how assets are distributed after someone dies
What Are the Different Types of Trusts?
There are many different types of trusts, and the type you choose will depend on your goals for the trust. Some common types of trusts include the following:
- Irrevocable Trusts: An irrevocable trust is a type of trust that cannot be changed or terminated without the permission of the beneficiary. This type of trust is often used to protect assets from creditors or estate taxes.
- Revocable Trusts: A revocable trust is a type of trust that can be modified or terminated at any time. This type of trust is often used when someone wants to have control over how their assets are distributed after they die.
- Testamentary Trusts: A testamentary trust is a type of trust that is created by a will. This type of trust only comes into effect after the person who created the trust dies.
- Living Trusts: A living trust is a type of trust that is created during someone’s lifetime. This type of trust can be used to manage assets while the person is alive, and can also be used to control how those assets are distributed after they die.
What Are the Benefits of Setting Up a Trust?
There are many benefits of setting up a trust, including the following:
- Asset Protection: One of the main benefits of setting up a trust is that it can help protect your assets from creditors or bankruptcy.
- Probate Avoidance: Another benefit of setting up a trust is that it can help your estate avoid probate. Probate is a legal process that can be costly and time-consuming.
- Estate Tax Savings: Trusts can also help you save on estate taxes. When assets are held in a trust, they are not subject to estate taxes.
- Discretion: Trusts also give you more discretion over how your assets are distributed after you die.
If you are thinking about setting up a trust, or have any questions about trusts, be sure to speak with an attorney or financial advisor.
What are the Risks of Setting Up a Trust?
There are a few risks to consider before setting up a trust, including:
- Complicated and Costly: Trusts can be complicated and costly to set up. You will need to hire an attorney or financial advisor to help you with the process.
- Inability to Change: Another risk is that once you create a trust, it may be difficult or impossible to change. This is why it’s important to make sure that you choose the right type of trust for your needs.
- Loss of Total Control: When you create a trust, you are giving up some control over your assets. This can be a risk if you are not comfortable with someone else managing your money.
Contact us today for a Free Initial Meeting to learn more about how we can help you with your trust planning needs.