Continuing The Tradition Of EXCEEDING EXPECTATIONS

3 types of trusts to add to your estate plan today

On Behalf of | Oct 30, 2024 | Estate Planning |

Many Americans have a will, which allows them to instruct how their estate should be managed after they pass away – including naming beneficiaries to inherit the deceased’s assets. Before a beneficiary receives any inheritance, they may need to wait for the probate process to end, however, which could take over a year. Furthermore, a beneficiary may not receive their full inheritance because of taxes and disputes. 

One way to avoid probate, taxes and duties is by making a trust. A trust is a legal arrangement that allows a trustee to manage assets according to a trust’s terms. As a result, assets may be protected from disputes, probate and taxes. Several types of trusts can be added to an estate plan, including:

1. Incentive trusts

An incentive trust allows the grantor to instruct when and why assets may be distributed to beneficiaries. Instead of receiving assets when the grantor passes away, a beneficiary may need to meet a certain clause to receive assets. This can protect assets from being misused. Some people have used incentive trusts to fund a beneficiary’s college education, for example. 

2. Generation-skipping trusts

A grantor can set up a generation-skipping trust to leave an inheritance to grandchildren. This trust is one of the many ways to protect a high-value estate from being heavily taxed.

3. Charitable trusts

A charitable trust can be set up to donate funds to private organizations, charities or research groups. Funds in a charitable trust can be distributed at regular intervals at a fraction of the trust’s value to prolong the use of funds. 

Setting up a trust is not a “do-it-yourself” process. Seeking legal guidance is wise.