You may picture managing millions of dollars in assets, expensive cars, and lavish properties when you think of a trust. But, you don't need to be a millionaire to set one up.
If you worry about asset distribution after your death, you may want to consider a trust. It doesn't matter how humble you think your assets are.
There are different types of trusts to consider for your unique situation. Keep reading to learn more.
What Is a Trust?
A part of the estate planning process, a trust is a legal mechanism that can control the distribution of your assets. In the event of passing away, trusts can also cut taxes and save time for beneficiaries.
You don't have to set up a trust on your own. An estate planning lawyer can help you establish one.
How Does a Trust Work?
There are three parties involved in a trust. There is the trustor, who has the assets. Then, the beneficiaries are the people (or a single person) to whom the trustor wants the assets to go.
There is also the trustee. The trustor appoints the trustee to oversee the asset distribution process.
The trustee is bound by law to distribute assets according to the trustor's wishes.
Types of Trusts: The Basics
So, you're interested in getting a trust up and running. Have you considered if you want to access these assets during your lifetime? Do you want to continue to add funds or not?
There are many different types of trusts, so that's why it is important to ask a few of these questions. Below you can learn about the three general categories that trusts fall into.
Revocable or Irrevocable
As the trustor, if you want to be able to change the trust during your lifetime, you can create a revocable trust. Once a trustor establishes an irrevocable trust, they cannot change it.
Funded or Unfunded
You come across some unexpected money that you'd like to put in your trust. A funded trust allows you to add assets during your lifetime.
So, an unfunded trust does not allow you to add funds. Upon the trustor's death, a trustee can add funds to this type of trust.
Living or Testamentary
If you want to use your assets for your benefit, you can think about a living trust. It allows an individual to continue to use their assets during their lifetime.
If you want to figure out asset distribution after you pass away, you may consider a testamentary trust. This trust designates assets after the death of the trustor.
Find Out Which Trust Is Best for You!
Trusts protect your assets, reduce confusion for your beneficiaries, and can save everyone time. And that's the basics of what a trust can do.
Everyone has a unique estate, and that's why there are so many types of trusts to choose from.
Contact us today if you want to learn more about which trust can best help you.