What Are the Different Types of Trusts?

Most of us know that trusts exist. We're less aware of the fact that there are different types.

There are, in fact, several different types of trusts that can be established by individuals and estates. Believe it or not, these trust types can be very helpful in planning the future of your estate.

If you want to deepen your understanding of the types of trusts available, keep reading. We'll teach you everything you need to know about the different types of trusts.

Overview of Trusts

Trusts are legal documents that allow a person to take ownership of a property or asset. Trusts can be used to hold assets for the benefit of another person. Trusts ensure that assets held are securely separated from other assets so that they can be used as intended by the trustor.

There are plenty of uses for trust—estate planning, giving for charity, or tax planning to name a few. Trusts also provide protection from future creditors in certain circumstances.

If you want to learn more about trusts and how to get one, set up a fiduciary appointment. You can read about fiduciary appointments in the link.

The Different Types of Trusts

Trusts come in different forms, such as testamentary trusts, revocable and irrevocable trusts, and specialty trusts.

Testamentary Trusts

A testamentary trust is created under the provisions of a last will and testament. It is established upon the death of the trustor (also known as the testator). The terms of the trust are specified in the will.

The trustor's assets will be transferred to a trustee upon death. They will be responsible for managing the trust. They will be the ones to distribute assets in accordance with the will.

Testamentary trusts generally provide for asset management and distribution among family members or charities in a tax-efficient manner.

Revocable and Irrevocable Trusts

Revocable trusts can be modified or revoked by the trustor, while irrevocable trusts cannot be modified or revoked. A revocable trust allows the trustor to retain control over the assets, while an irrevocable trust relinquishes all control to the trustee.

Generally, revocable trusts present fewer tax advantages. This makes them better for young families and individuals creating financial plans.

Irrevocable trusts are usually used by older, wealthier families and individuals with more complex financial situations. They offer the ability to protect assets, avoid the probate process, and receive tax benefits.

Specialty Trusts

Specialty trusts are trusts set up to provide benefits or money to individuals or organizations with specific needs. These trusts are tailored to meet the needs of particular individuals, organizations, or establishments. The funds in a specialty trust may be used for medical treatments, research, education, or even charitable purposes.

Specialty trusts are normally managed by trustees appointed by the settlor, and the beneficiaries are usually identified at the time the trust is set up.

Protect Your Assets With Trusts

There are many different types of trusts available, each offering its own benefits. Clients should research trust options and hire legal services to determine the right trust setup for their particular situation. Creating a trust is an important decision and should not be taken lightly. Get started today to find the trust type that best meets your needs.

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