Having one or more trusts can be beneficial when drawing up your estate plan. You can protect your assets from lawsuits, creditors, and excessive taxes. You can also better manage how and when your beneficiaries receive their inheritance.
What is a trust? It is an agreement that allows a third party to hold money or property on behalf of your beneficiaries. From a revocable to an asset protection trust, there are many types you can use for your estate plan. Let’s explore some of them to help you find out which best fits your needs.
- Revocable
A revocable trust is a legal document wherein you assign a trustee who will manage your assets according to the rules of the agreement. This type of trust is also known as a living trust because they become effective and can be changed or ended at any point during your lifetime.
After your death, the assets in a living trust are transferred to your beneficiaries without going through probate—a lengthy and costly legal procedure. However, funds and property in this trust are still considered personal assets, so creditors can access them to pay off your debts. Plus, they can be taxable. Still, a revocable trust is an excellent option if you want more flexibility and control in allocating your assets.
- Irrevocable
An irrevocable trust is much more permanent than a revocable one. Once it’s set up, you can’t easily change its details—such as the beneficiaries and the established guidelines. Furthermore, you can’t easily sell off assets in this trust.
To modify or cancel this trust, you need the permission of your beneficiaries and trustee. While this may seem like a drawback, an irrevocable trust offers some excellent asset protection benefits because the assets in it are not considered yours. First, they are not included in the estimate of your estate tax. Secondly, creditors don’t have access to the contained funds and property.
- Asset Protection
An asset protection trust (APT) is a legal arrangement to help keep your assets safe from creditors, lawsuits, and other claimants. This type of trust is self-settled, meaning you can assign yourself as the beneficiary. Plus, you can also access your assets at any time.
You can establish an APT domestically or internationally. Either way, setting up this type of trust can be costly. But individuals with a net worth of more than $250,000 should consider creating an asset protection trust.
Protect Your Estate With Trusted Attorneys
At Baird Mandalas Brockstedt Federico & Cardea, we are a team of law experts providing top-tier legal services in the Delaware area. Our lawyers can help you create a well-drafted estate plan that protects your assets and meets your goals tax-efficiently. Contact us if you want to learn more about drawing up an estate plan and establishing a trust!