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Which Trust Do You Need for Your Estate Plan?

Settling your estate and the process involved – choosing your beneficiaries, taking inventory of your assets, and so on – can be complicated, so it’s important to discuss your estate planning wishes with trusted professionals who can consider wealth and tax implications as part of the legacy you wish to leave behind. A critical component of estate planning is deciding how you would like your assets to be distributed. For some, this includes setting up a trust - and there are many options to consider. Which one might be right for you?

What is a trust for an estate plan, and why would you need it? 

A trust is a legal contract that allows you, as the trustor – while still living or upon your death – to dictate how to transfer assets or property to designated trustees and/or beneficiaries. It is not the same as a will, however. 

A trust that has been properly established can help legally protect your assets from probate as well as make the inheritance process and potential tax burdens easier on your beneficiaries. 

Considering which type of trust is right for your estate planning needs

 While setting up a trust isn’t your only option - for example, you can set up a transfer on death (TOD) deed instead - trusts are common choices in estate planning. Here are five trust types to consider:

  • Revocable living trust: If you have assets, properties, and designated beneficiaries, a revocable living trust may be the right option for you. The grantor retains ownership of the assets since it is revocable. The grantor can change the terms and beneficiaries or dissolve the arrangement at any time.
  • Irrevocable living trust: The grantor intentionally gifts assets to an irrevocable trust for asset protection and/or estate tax reduction. Since the assets are being gifted away, the grantor no longer is the owner of the assets thus making it irrevocable.
  • Pet trust: If you want to ensure that your pets are provided for after you pass away, setting up a pet trust is a possibility. In a pet trust, you can specify your pet’s standard of living and make sure that they are properly cared for with housing, food, and medical treatments if necessary.
  • Special needs trust: If your beneficiary has disabilities to consider, then a special needs trust might be a plan of action to discuss. The trust could supplement disability assistance payments, but there are tax considerations involved. If you are planning on establishing this type of trust, working with a Chartered Special Needs Consultant (ChSNC®) can greatly benefit you as you plan.
  • Charitable trust: If you would prefer to leave your assets to your favorite charities, then establishing a charitable trust can help you manage your charitable giving preferences. Implementing a charitable giving strategy is a good financial investment overall, so it might be worth it to discuss this option with your financial advisor and tax professional.

Choosing An Estate Plan Trust Strategy with Chatterton & Associates

Choosing a trust for your estate planning needs takes time and consideration for your interests, the legacy you choose to leave, and the continued wellbeing of your beneficiaries after you pass away. Chatterton & Associates - with the assistance of our corporate partner, the Law Office of James F. Roberts & Associates – works with you to determine the right type of trust with potentially greater tax advantages, and will be here to answer any questions or concerns you may have. Contact the financial and tax professionals at Chatterton & Associates today to discuss.

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