What Are The Different Types Of Trusts Available To Use And Their Purposes?
The most common type of trust is called a revocable living trust. A revocable living trust is modifiable and revocable during the lifetime of the trust creator. The trust becomes irrevocable once the trust creator passes away. This kind of trust provides maximum flexibility for the trust creator. The primary purposes are to:
- Make things easier on your family
- Save money by avoiding probate
- Save money on federal estate taxes (aka “death taxes”)
- Prevent family arguments
- Identify beneficiaries
- Outline any conditions the trust creator wants satisfied before the beneficiaries are allowed to receive their gifts
- Create organization
- Streamline the process for transferring assets
- Reduce the risk of getting a court involved in your estate
- Pass over management of trust assets to someone else if you become unwilling or unable to manage your own assets
- Maintain control over your assets during your lifetime and after
There are some other trusts which are far less common. A few of the purposes of those trusts include reducing tax liability for the trust creator, gifting assets to charities, protecting government entitlements, and leveraging life insurance death benefits to create additional wealth.
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