With regards to estate planning, many think that it is all about the future and later in life decisions. While it is important to take action to draft documents that detail what should happen at your death or in the event of incapacitation, it is vital for individuals in New York and elsewhere to consider steps they can take in their lifetime to benefit their financial future. This is often where trusts can be beneficial.
What types of trusts are there? There are six major types of trusts one can consider. The first is a revocable trust. This is created during a person’s lifetime and can be changed or revoked. This is often referred to as a living trust. The next type is an irrevocable trust. Unlike a revocable trust, this trust cannot be altered or revoked once it is created. The third type is an asset protection trust. This type of trust is designed as a form of protection so a creditor cannot make a claim to an individual’s assets in the future.
The fourth type of trust one could enter into is a charitable trust. This type of trust is designed to benefit a a charity or the general public. Typically, these are created within a state plan in an effort to avoid or lower the estate and gift taxes.
The next type is a constructive trust. This is an implied trust. This is determined by circumstances and facts and the court establishes it. If there are intentions to create a trust, then it is possible to establish a trust even if one was not formally created. The final type of trust is a special needs trust. This is designed for those receiving government benefits so they do not disqualify him or her from receiving those benefits.
Because there are a wide range of trusts available, it is important to consider whether one or several of these trust types could benefit you. By becoming fully informed, individuals and families could take proper steps to protect their finances now and in the future.
