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5 types of trusts to consider when deciding if you want a trust

On Behalf of | May 14, 2024 | Estate Planning | 0 comments

Several factors merit consideration to ensure a trust aligns with your best interests. For example, a trust can serve various purposes, such as asset protection, estate planning or charitable giving.

Understanding your goals and circumstances will help determine the most suitable type of trust for your needs.

1. Living trust (revocable trust)

A living trust, also known as a revocable trust, offers flexibility and control during your lifetime. With a living trust, you can transfer assets into the trust’s ownership while retaining the ability to amend or revoke it as needed. This type of trust allows for seamless management of assets and potential incapacity planning. A successor trustee can step in to manage affairs if you become unable to do so.

2. Irrevocable trust

An irrevocable trust provides a higher level of asset protection and may offer tax benefits. Once you transfer assets into an irrevocable trust, the grantor typically cannot alter or remove them. This type of trust can be advantageous for individuals seeking to protect assets from creditors, minimize estate taxes or provide for loved ones with special needs.

3. Support trust for children

A support trust for children allows you to provide financial support for your children while maintaining control over the distribution of assets. This type of trust can safeguard assets from mismanagement or outside influences. It can also ensure asset usage for the intended purpose, such as education, health care or living expenses.

4. Charitable trust

A charitable trust enables you to support charitable causes while potentially enjoying tax benefits. By transferring assets into a charitable trust, you can designate a charity or charities to receive distributions either during your lifetime or after your passing. This type of trust can be tailored to meet your philanthropic goals while also providing potential income or estate tax deductions.

5. Insurance trust

An insurance trust can help mitigate estate taxes and provide liquidity to cover estate settlement costs. You can place life insurance policies in the trust to keep the proceeds outside of your taxable estate. They can be available to beneficiaries without taxes diminishing them.

Determining whether a Florida trust is in your best interest involves assessing your goals, financial situation and desired level of control. You may be able to use various types of trusts to your advantage.