There are several different trusts available to you and you can use them to accomplish distinct goals. A trust is a vehicle for managing your assets while you are alive, after you pass away, or both. One major advantage of most trusts is they avoid probate, saving your heirs time and money.
A trust is a document that gives one person the right to hold and distribute property for the benefit of another person. A trust requires a person who creates the trust by transferring their property into the trust (called a settlor), a person who manages the trust (called a trustee) and a person who benefits from the trust (called the beneficiary). If there is only one trustee and one beneficiary, they cannot be the same person. You can create a trust for any valid purpose including avoiding probate, saving money on taxes, or distributing funds over time. You can use a trust to manage a specific asset or caring for a specific person. Below is a non-exhaustive list of a few types of trusts:
• A Testamentary Trust is established in your will and takes effect only after you pass away and upon the completion of probate.
• A Living Trust is created and funded during your life. It can be revocable or irrevocable. Irrevocable (not able to change) trusts have special tax treatment and can be used for Medicaid planning. A living trust, if fully funded, can be used to avoid probate after your death and may avoid the need for a conservatorship if you become legally disabled.
• A Pet Trust is established for the care of a designated (named) pet upon your death. You appoint or "designate" a person to care for your pet until that pet passes away. The remainder of your assets will then be passed to the person you name to receive it.
• An Income Cap Trust is created so that the beneficiary can qualify for Medicaid for long term care.
• A Life Insurance Trust is a way to keep the proceeds of your life insurance policy out of your taxable estate. This type of trust must be set up as an irrevocable trust that names someone else as the trustee.
To see if a trust is a good tool for you and to discuss other estate planning goals, call NW Estate Law, LLC at (503) 445-2232 or email Lorrie Bentley to schedule a meeting with an attorney. She can be reached at firstname.lastname@example.org.