If you are beginning the estate planning process, you may ask yourself, "what are the types of trusts available to me?" While the revocable ("living") trust is the most basic, there are several other types of trusts clients in Northern Virginia can choose from when planning for their families' futures upon their passing. At its most basic, a person's (grantor's) property or money is held by a trustee (fiduciary) who is highly trusted and ethical. A trustee holds title to the money or other property for distribution to the beneficiary or beneficiaries after the person's death. The Law Office of Aubrey Carew Sizer PLLC is available to provide skilled legal guidance regarding the various types of trusts at (571)-403-2619
Overview of Trusts
Some of the most common types of trusts include the following:
• Revocable Trust
• Irrevocable Trust
• Special Needs Trust
• Testamentary Trust
• Charitable Trust
• Asset Protection Trust
• Constructive Trust
• Tax By-Pass Trust
• Spendthrift Trust
• Totten Trust
Revocable and Irrevocable Trusts
Also referred to as a Living Trust, a Revocable Trust can be revoked or modified by the grantor any time and for any reason, if they are considered mentally competent. Revocable Trusts do not fully protect assets while the grantor is still living, and creditors could gain access. Asset management and probate avoidance are two common reasons people choose this type of trust.
Irrevocable Trusts require that beneficiaries give consent before any modifications; otherwise, the grantor cannot later change this type of trust. Irrevocable Trusts are beneficial when planning for long-term care costs or for those in litigious professions who may be susceptible to lawsuits. Long-term care planning and tax considerations are the primary reasons people choose Irrevocable Trusts.
Special Needs Trusts
Also known as Supplemental Needs Trusts, Special Needs Trusts are designed to protect the financial future of a disabled child, spouse, relative, or friend. This estate planning tool keeps assets out of the name of the disabled individual, thereby protecting state and federal benefits eligibility.
Special Needs Trusts are meant to provide for the enrichment of the beneficiary as opposed to their primary care needs, which important government benefits typically cover. Special needs that may be paid for with this type of trust include, but are not limited to:
• Dental care
• Advanced medical equipment such as mechanical beds and electric wheelchairs
• Insurance premiums
• Private rehabilitation
• Yearly medical checkups
• Vacations and companions for driving or other needs while traveling
• Psychological support services
• Electronics such as computer/internet access, television, and telephone equipment, and sound systems
Asset Protection Trusts
Asset Protection Trusts are a type of irrevocable trust designed to protect a family's assets against predators or the catastrophic costs of long-term care. Also referred to as Domestic Assets Protection Trusts, this type of trust is used to plan for those who will need skilled level nursing care and is often also desired by those in career fields that put them at an increased risk of litigation. Architects, contractors, dentists, doctors, attorneys, and professional engineers are some examples of those who may find themselves the defendant in a lawsuit. In addition, young entrepreneurs and professionals often set up Asset Protection Trusts to build a "nest egg" for the future. According to Annuity.org, if appropriately structured, Asset Protection Trusts not only protect assets from creditors and in the event of a divorce but in situations where it becomes necessary to file bankruptcy.
Testamentary Trusts are created in a person's Last Will and Testament. Established by the trustor (individual creating the trust), Testamentary Trusts are frequently used to manage property that will be passed to a minor child or children upon the trustor's death until the age designated in the will. This type of trust can also be used to plan for a disabled spouse or incapacitated loved one. Testamentary Trusts are subject to court supervision and yearly accountings with the Commissioner of Accounts filed by the trustee. Examples of types of property that may be set aside in a Testamentary Trust include jewelry, real estate, vehicles, personal papers, residences, stocks, bonds, or other investments. It is important to note that a new will must be executed if the trustor desires to eliminate a Testamentary Trust.
Charitable Trusts help people support charities and causes they believe in and are passionate about, along with family or other beneficiaries. Charitable Trusts are irrevocable, so it is crucial to be sure about using this type of trust. Charitable Trusts have many benefits, including tax advantages, investment diversification, and annual income for trustors or beneficiaries. There are two types of Charitable Trusts, Charitable Lead Trusts (CLT) and Charitable Remainder Trusts (CRT). These types of trusts are not to be considered for tax exemption purposes, as they are not regarded as charitable organizations according to the Internal Revenue Service (IRS).
Contact An Experienced Trust Attorney Today
Trusts are an essential legal tool in many people's estate planning strategies, however considering there are so many different types of trusts, it can be difficult to determine which is suitable given each person or family's unique circumstances. From Revocable and Irrevocable trusts to Spendthrift and Totten Trusts, the similarities and differences can be confusing. Nevertheless, planning for your family's future and security is one of the most important steps you can take for your peace of mind; however, you do not want to attempt it without skilled legal guidance and support.
All a family should face following the passing of a loved one is the process of grieving, not calls from collectors, lawsuits, and others that only add to the stress and anxiety. At The Law Office of Aubrey Carew Sizer PLLC, we work diligently to help clients determine the best way to proceed regarding estate planning, wills, trusts, and other instruments that ensure the future of family and loved ones. For answers to questions or to set up a consultation, we encourage you to call (571) 403-2619 to learn more.