Estate planning can seem like an overwhelming process. And it may not seem immediately necessary. These ingredients make a recipe for procrastination, and that’s what a lot of people do when it comes to creating an estate plan. This can prove harmful to your estate and your loved ones. But by educating yourself, you can take some of the mystery and guesswork out of your estate plan, which can make it a lot easier to clear this topic from your to-do list.
This week on the blog, let’s briefly look at some trust options that may be fitting for your circumstances. After all, there’s usually a lot of confusion about what a trust can do for a family and an estate.
- Special needs trust: This type of trust is best suited for those who have a loved one who will need extensive care in the future because assets that are placed in this trust and ultimately distributed to a named beneficiary don’t count as income when it comes to government benefits eligibility determinations. Therefore, by using this kind of trust you can financially support your loved one while protecting his or her ability to obtain treatment and care through Medicaid. The trust assets can be pretty broadly used, too, although there are some specific limitations.
- Incentive trust: If you worry about how a loved one is going to spend his or her inheritance, or how it will affect his or her willingness to contribute to society, then you can place assets in an incentive trust. Here, your loved one may receive periodic payments from the trust with the bulk of it being dispersed once a qualifying condition is met. You can get creative here, putting in conditions related to graduation from college, getting married, having a child, or even completing some sort of addiction treatment.
- Remainder trust: This type of trust pays out to a named beneficiary, usually for his or her life, with whatever is left in the trust passing to someone else. This trust can be useful in a charitable context or when you’re operating within a blended family and you want to protect your children from another relationship.
- Charitable trust: If you want to support a worthy cause or some nonprofit endeavor that you love, then a charitable trust may be best for you. This type of trust can also give you extensive tax benefits if you have a large estate.
- Spendthrift trust: This type of trust specifies when assets will be released and how much can be accessed by a named beneficiary. As a result, you can control the beneficiary’s access to the trust funds, thereby protecting them from misuse. For example, you can specify that a beneficiary will receive interest earned on the trust assets, but that the beneficiary can’t access the principal assets that have been placed in the trust.
- Generation-skipping trust: This type of trust allows you to pass assets directly to your grandchildren, thereby passing over your children. This strategy can have tax benefits, and it still gives your children access to some of those funds that have been passed down.
Keep in mind that these are just some of the trust options available to you. Regardless of your circumstances, there’s probably a trust out there that can suit your needs, protect your loved ones, and maintain the viability of your estate.
Let an attorney help you create the estate plan that you need
Researching your estate planning options can take a lot of time, though, which is why it might be best for you to work closely with an attorney who is knowledgeable in this area of the law. One of these lawyers can help you navigate the process and develop the plan that is right for you. If you’d like to learn more about what that process looks like, then please consider reaching out to a law firm of your choosing.