When making an estate plan, testators can draft their will. A will is a legal document that instructs how the testator wishes their assets to be handled after their passing and who should benefit from the estate. However, wills are vulnerable to probate, disputes and estate taxes.
To avoid these issues, people can create trusts in their estate plans. A trust allows a grantor to give assets to a trustee who is responsible for holding onto the assets and distributing them to beneficiaries at the right time.
The most common kind of trust is a revocable one. A revocable trust can be altered at any time during the grantor’s life and becomes irrevocable upon their passing. While revocable trusts are popular, it’s not the only option. Here’s what you should know:
1. Pet trust
A grantor can put aside assets for their pet with a trust. Assets in a pet trust are used primarily for the pet’s needs, such as for their food, shelter, medicine, grooming and care.
2. Charitable trust
People often give back to communities when they pass away. A charitable trust can help instruct how assets are distributed to private organizations, research programs and charities
3. Spendthrift trust
A beneficiary who isn’t responsible with money may still be included in a spendthrift trust. A spendthrift trust limits how much of an estate a beneficiary has access to so that assets are not irresponsibly used.
4. Generation-skipping trust
Future generations can benefit from a generation-skipping trust. A grantor can put aside assets in a generation-skipping trust for the benefit of grandchildren, for example, which can also help avoid taxes.
There are many kinds of trusts with special legal wordage. It can help to reach out for legal guidance as you explore your trust options.