There are many misconceptions surrounding trusts, especially when it comes to estate planning. Some may think that trusts are only for those with lots of wealth, while others worry that they’ll give up control of their assets by creating a trust. The truth is that trusts can be highly beneficial to any estate plan, regardless of wealth or age. If you’re new to estate planning or thinking about incorporating trusts into your plan, keep reading to learn what you need to know before forming a trust.
What is a Trust?
A trust is a type of legal contract that allows a third party to hold assets for the benefit of a beneficiary. Assets can include money, property, personal items, and more, all of which are managed by a trustee. There are various types of trusts that serve different purposes.
Understanding Your Options: Different Types of Trusts
You’ve probably heard of the term trust fund, but did you know that there are several different types of trusts? Depending on your financial goals, you might choose to create one or more different trusts.
Revocable Living Trust
The most common type of trust in estate planning is a revocable living trust. That’s because revocable living trusts are the most flexible, allowing the creator (grantor) to alter, revoke, and control trust assets during his or her lifetime. Most basic estate plans can benefit from having a revocable living trust in place.
Irrevocable Living Trust
Irrevocable trusts differ from revocable trusts because, like the name implies, they cannot be changed or revoked during the grantor’s lifetime. These types of trusts are more common among very large estates as a method of reducing federal estate taxes, passing along family businesses, or preserving privacy.
Other Trusts
Although living trusts are the most popular in terms of estate planning, you may wish to consider other types of trusts. Charitable remainder trusts, special needs trusts, and life insurance trusts may all be beneficial to certain individuals despite being less common.
Pros and Cons of Including a Trust in Your Arkansas Estate Plan
Pros
Possibly the most beneficial aspect of trusts is that they help keep your assets out of probate, which can be a long and costly process. That can save your loved ones time and money, allowing them access to your assets without hassle. Trusts can also help you avoid federal estate taxes if your estate is worth more than $13.61 million.
Cons
It’s incredibly important that you consider all the cons of creating certain types of trusts before forming them, especially irrevocable trusts. For example, some trusts won’t protect your assets from creditors. Additionally, your family dynamic or financial situation can change, leaving you out of control of your own assets.
How to Incorporate Trust into Your Arkansas Estate Plan
Are you ready to discuss the right type of trust for your estate plan? Then it’s time to talk to an estate planning attorney at L. Jennings Law. Our Arkansas-based law team is well-versed in estate planning, including local and federal laws that can impact your plan. Contact us today to start a discussion with the L. Jennings Law team.
