What Are The Different Types Of Trusts? What Are Their Purposes?
What Is A Trust?
One way some people choose to create estate plans is by setting up a trust. The person who creates a trust is called a trustor, and the person who receives it is known as the beneficiary. A trustee is a person who handles the assets in the trust on behalf of the beneficiary.
For example, a mother may create a trust for her young son and name her brother the trustee. The son is entitled to the assets in the trust, but the deceased mother’s brother controls the assets according to her wishes outlined in her estate plan.
What Are The Different Types Of Trusts?
There are a few different types of trusts and each type of trust has a specific purpose. This allows an individual to create a trust that is in the best interests of the beneficiary. Speak with an experienced trust attorney in Downey, CA for advice on which type of trust listed below is right for your situation.
- Revocable Trust: This is a very common type of trust. It can be modified, changed, or terminated at any moment by the trustor should the trustor have the full mental capacity to do so. The permission of the beneficiary is not needed. It’s important to note that a revocable trust doesn’t protect your assets from creditors.
- Irrevocable Trust: With this type of trust, the trustor nullifies their rights once it is created. This means that when the trust is made, the creator no longer has any rights to the trust. They are unable to change or terminate it at any time throughout their life. Unlike a revocable trust, an irrevocable trust does protect your assets from creditors.
- Irrevocable Life Insurance Trust: This trust allows the trustor to remove their life insurance from their estate. In doing so, the beneficiary to the estate may be free from any taxes that are placed on the trustor’s life insurance policy.
- Testamentary Trust: A testamentary trust is created as a part of a will. This only becomes effective after the individual passes away.
- Charitable Trusts: In California, including Los Angeles County, people can choose from two types of charitable trusts: A charitable lead trust or a charitable remainder trust. A charitable lead trust allows charities of the individual’s choice to receive interest from their financial gift for a set period of time. When the set period of time ends, whatever is left of the trust may go to their family or other non-charitable beneficiaries. A charitable remainder trust allows charities to receive the trust’s assets at the end of the trust term. Until it ends, the donor continues to receive interest on the gift.
- Special Needs Trust: A special needs trust can be created for a loved one with a disability. With this, the trustor can make sure they receive any necessary financial support throughout their life. There are even special needs trusts that are designed to distribute assets to disabled individuals without risking their eligibility for government assistance.
Again, it’s best to speak to a Downey, CA trust attorney to determine what type of trust would work best for you.
How Can Someone Legally Protect Their Assets From Incapacity?
There are several ways of protecting your assets from incapacity in Los Angeles County. Quite simply, put those assets into a trust that the trustor can’t access.
While assets are in the trust, the trustor can’t access them, but neither can the creditors. Consider the trust to be like a vault or a time capsule for assets. The assets within the trust will remain untouchable by anyone for a certain period of time. Once that time period has ended, then the trustor regains access to the money.
Creating this type of trust requires that you work with an experienced trust attorney in Downey, CA in order to avoid the possibility of making fraudulent transfers and having the trust invalidated.
How Do I Create A Trust Or An Estate Plan?
Attempting to prepare an estate plan or any type of trust in Los Angeles County without any legal guidance isn’t recommended. You always want the advice of a trust attorney.
For more information on Creating Or Reviewing An Estate Plan Or A Trust, a free initial consultation with a Downey, CA estate planning attorney is your next best step. Get the information and legal answers you need by calling (818) 900-5794 today.
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