When you start working on your estate plan (a good thing to do), you may want to consider establishing a trust. What are some circumstances which make trusts useful? What kinds of trusts are possible and what are the differences? Here is a brief overview to jumpstart your effort.
For many of us, a basic last will and testament will go a long way toward leaving our affairs in order for loved ones. However, some life circumstances make trusts important considerations in estate planning. As the Times Herold-Record explains:
Trusts are legal entities that own assets, and all trusts are not alike.They are created by a written trust document with certain provisions that can vary from trust to trust. However, every trust has a “grantor” who creates the trust, a “trustee” who manages trust assets, and “beneficiaries” who receive trust income or assets.
If you choose to work with a lawyer and establish a trust, you will designate a trustee to administer it. Obtaining a trustee bond is a good way to protect the interests of the beneficiaries. Essentially, a trustee bond is a type of fiduciary bond that guarantees that the trust will be administered in accordance with the law. It is quick and easy to obtain a trustee bond from leading national provider: Colonial Surety Company. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond instantly—from anywhere. It is so simple you can do it now: Trustee Bond Here.
Types of Trusts
Lawyers recommend different types of trusts for particular circumstances, For example, in some cases, families want to avoid the probate process—and make assets available expediently to beneficiaries. Trusts are sometimes used as a tax strategy as well as to safeguard family assets for future generations. Legal experts offer these examples of trust types:
A “Revocable Living Trust” (RLT) is created during the lifetime of the grantor when assets are transferred to the trust. The trustee of the trust transfers assets to the beneficiaries on the death of the grantor…. Living trusts save time and money on the settlement of the estate and avoid litigation called “will contests” when beneficiaries fight over the inheritance.
A “Medicaid Asset Protection Trust” (MAPT) is an irrevocable trust created during the grantor’s lifetime that protects assets in the trust from the grantor’s nursing home costs after the assets are in the trust for five years and from the grantor’s home care costs after the trusts are in the trust for two and a half years. The MAPT also avoids probate.
A “Special (or Supplemental) Needs Trust” (SNT) holds assets for a person with a disability who receives government benefits such as Supplemental Security Income (SSI) and Medicaid. The trustee may use trust assets for the benefit of the disabled beneficiary to enhance his or her life but may not give trust assets directly to the beneficiary. The SNT allows the beneficiary to benefit from trust assets without losing government benefits.
If you have a loved one with special needs, setting up a trust is an especially important way to plan ahead for their well-being. Trusts can even be established to arm your family or friends with resources to care for you if you become incapacitated.
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