A trust is a legal document that people can include in their estate plan if they are seeking more security options for their assets. This legal document is an arrangement between grantor and a trustee. The grantor trusts the trustee to manage their assets and disperse them at the appropriate time to beneficiaries.
The benefits to making this arrangement with a trustee is that assets may avoid estate taxes, probate and challenges. This can help ensure assets go to beneficiaries in full without difficulties.
Grantors have the option to make several different kinds of trusts with varying benefits. Here is what you should know:
3 kinds of trusts
A trust can include unique language that allows a grantor to control how their assets are handled. Here are several types of trusts that can be drafted:
- Revocable trust: This is the most basic kind of trust. A revocable trust allows a grantor to add or remove assets or beneficiaries at their leisure. This trust becomes irrevocable when the grantor passes away, which can help ensure nothing changes in the trust.
- Incentive trust: A grantor can make clauses in an incentive trust that beneficiaries must meet before obtaining assets. A clause could state, for example, that a beneficiary must have a child before accessing assets. The unique language in an incentive trust often needs to be specific to avoid beneficiaries using loopholes to access funds.
- Charitable trust: Many people use trusts to donate assets to charities. A charitable trust could control how often assets are donated and the frequency of donations to individual organizations, charities or research programs.
If you are considering making a trust, it can benefit you to reach out for legal help to learn about your options.