Not all living trusts are the same. And I’m not talking about quality either, though that is a major factor too. I’m talking about the difference between minivans, pickups, and sports cars. There are five major types of trusts that we use every day in our practice for different situations.
Probate Avoidance Trust
This is the basic, direct distribution trust that is the typical trust people are introduced to when they learn about wills vs. trusts. This trust takes a no-nonsense, keep-it-simple approach to dividing all the assets between the beneficiaries and having accomplished its purpose, ride off heroically into the sunset.
Personal Asset Trust
What if your beneficiaries’ inheritance could be protected against lawsuits, creditors, and even divorcing spouses? With Estate Plan Pros’ “Personal Asset Trust” you can provide dramatically increased protection for your beneficiaries against these financial risks. Read more about the Personal Asset Trust here.
Surviving Spouse Asset Protection Option
If you have children from another relationship that you’re including as beneficiaries, what happens when you’re not the surviving spouse? What happens to your assets? We can set up the trust to split in half at the death of the first spouse so that portion becomes an asset protection trust, and locks in the beneficiaries for your half of the estate.
Beneficiary Protection Trust
Some beneficiaries should not control their inheritance, or at the very least need some assistance managing their inheritance. A beneficiary might have significant disabilities that qualify them for government assisted programs like SSI, SSDI, Medi-Cal, or might have significant substance abuse issues, or event simply major financial problems. For these beneficiaries a Special Needs Trust or Spendthrift Trust can be set up to manage the inheritance for the beneficiary’s lifetime. This allows the beneficiary to receive the benefits of the inheritance without the burden or responsibility of managing the funds.
Retirement assets such as IRA’s, 401k’s and all their variations can often be the most significant asset that will be passed on to the next generation. Yet without prudent planning beneficiaries can accidentally or intentionally destroy the stretch-out of the inherited retirement plan. Additionally, the recent U.S. Supreme Court case, Clark vs Rameker, held that any asset protection you enjoy for your own retirement plan does not pass on to your beneficiaries. The Stand Alone Retirement Trust addresses both of these problems by helping ensure a proper rollover of the asset and giving your beneficiaries the option of using the retirement account as a protected asset. You can read more about the Stand Alone Retirement Trust here.
Every family is different, and their estate plan is going to reflect those differences of personalities and needs of beneficiaries. While these five broad categories describe the most common options, there other strategies and options that your estate planning attorney can review with you.