When Missouri residents begin the estate planning process, some become confused about the instruments available to them to preserve their wealth for their heirs. Various trusts are one type of estate-planning tool. How do you know which type suits your wishes and your family?
Why use trusts as part of your estate?
Financial trusts are not mandatory in estate planning, yet they are convenient instruments to ensure that your wealth is passed on in a manner suitable to your wishes. Establishing trusts makes it easier to transfer assets to the people or organizations you choose while reducing their possible tax burdens. You can also use trusts to shield your purchases from the IRS and potential lawsuits. Learning about the various trust options can help you plan for the future.
Common types of trusts
When considering your needs, you’ll come across various types of trust, all with different advantages and disadvantages. Consider these common trust types when establishing your estate plan:
- Revocable
- Irrevocable
- Testamentary
- Special needs
- Spendthrift
- Charitable
- Asset protection
- Bypass
- Totten
Revocable trusts allow you to change or dissolve these tools when your wishes change. Some, like asset protection and charitable trusts, do exactly what their name sounds like. Others need more explanation. Testamentary trusts allow you to create a trust from your will, while a Totten trust is essentially another name for a transfer-on-death bank account.
How do I select the appropriate trust?
One crucial point to remember is that unless you have previously established an irrevocable trust, you can change its contents and intentions at any time. As your needs change, your estate considerations also will. Some people may want to change beneficiaries or scrap their heirs altogether.
As long as you have kept excellent records regarding your trust, you can easily change its type or move certain assets to the appropriate person to hold for your offspring.
Some people consider placing their wealth in trusts of different types so their heirs can easily obtain assets. Including different types of trust in your estate plan can maximize savings for you or your children.