Either a living trust or a family trust can be used to accomplish the goals that you have for your estate. One type may be better for you over the other type, depending on your particular needs. The team at Elder Care Direction can help you to understand the differences between family trusts and living trusts.
Living trust vs. family trust
Family trusts include all trusts that are created to benefit family members and can be established in two ways. You can set up a testamentary trust in your will. This means it only begins its existent when you die and your will is probated. This type of trust will not avoid probate. A living trust is one that you establish during your lifetime. You may serve as the trustee of your living trust while you are still alive and name a successor trustee who will step into the role of trustee after you pass away. The method that you choose will depend on your circumstances. A major factor to consider is whether you want a trust to hold your assets during your life or if you want to continue personally controlling your assets while you are alive.
You might want to take the costs of setting up the trust into account. A living trust will cost more than a testamentary trust because it requires more documentation and planning beyond your will. However, if you will gain tax savings, a living trust may be more beneficial.
Revocable vs. irrevocable trusts
Living trusts and testamentary trusts can be revoked by you at any time. Revocable trusts are very flexible because you can change them. By contrast, irrevocable trusts cannot be changed or revoked after they are created. With this type of trust, you give up all of your rights to control the assets. This means that you won’t be able to remove the assets from the trust or serve as a trustee. There may be specific reasons that you might want to choose an irrevocable trust, however.
Credit shelter trusts
Credit shelter trusts are trusts that are used to eliminate or reduce estate taxes when a surviving spouse dies. These are set up so that when the first spouse dies, the surviving spouse can use the assets and receive income from the trust. However, the property will remain in the trust to pass on to other family beneficiaries after the surviving spouse dies. The assets in the trust will not be counted as part of the surviving spouse’s estate. Credit shelter trusts are beneficial for people whose estates may exceed the estate tax exemption limits.
Creating a trust can be a good idea for many people. If you think that you might want to create a trust, it is a good idea to get professional advice. Contact Elder Care Direction today to learn more.