A Last Will and Testament is typically the first estate planning document created and often continues to serve as the cornerstone of a comprehensive estate plan. A variety of estate planning tools and strategies, however, may eventually be added to the original plan. One of the most popular additions is a trust agreement. Knowing which type of trust can help you accomplish your estate planning goals is imperative to creating a successful plan. To help you better understand trusts, an Essex Junction trust attorneys at Unsworth LaPlante, PLLC explain some of the most common trusts.
Testamentary Trusts
A testamentary trust is a trust that doesn’t activate until the death of the Settlor through a provision in the Settlor’s Last Will and Testament. Because a testamentary trust is activated by a provision in a Will, it is always revocable up to the time of the Settlor’s death because a Will is always revocable.
Living Trusts
Formally known as an “inter vivos” trust, a living trust is a trust that is activated during the lifetime of the Settlor once all the formalities of creation are in place. A living trust can be either revocable or irrevocable.
Revocable Trust
A revocable trust is one that can be modified, terminated, or revoked at any time, and for any reason or without providing a reason, by the Settlor. A revocable trust can be a testamentary or living trust.
Irrevocable Trust
An irrevocable trust is one that cannot be modified, terminated, or revoked by the Settlor once the trust is activated. In most states, a court can modify or terminate an irrevocable trust under certain conditions; however, because that requires a court order it is best to consider an irrevocable trust to be one that you cannot change once it is activated. An irrevocable trust is always a living trust. Assets transferred into an irrevocable living trust are considered trust property and are, therefore, out of reach of creditors and other third parties.
Constructive Trusts
A constructive trust is an implied trust. An implied trust is established by a court and is determined from certain facts and circumstances. The court may decide that, even though there was never a formal declaration of a trust, there was an intention on the part of the property owner that the property be used for a particular purpose or go to a particular person. While a person may take legal title to property, equitable considerations sometimes require that the equitable title of such property really belongs to someone else.
Asset Protection Trusts
An asset protection trust is a specific type of irrevocable trust that is designed to protect your assets from claims of future creditors. The trust remains irrevocable for a specific number of years after which time the assets revert to the Settlor if there are no current creditor claims or threats. During the time that the trust is irrevocable, the Settlor cannot be a beneficiary of the trust for the assets to remain out of the reach of creditors.
Special Needs Trusts
A special needs trust is a specialized trust that allows you to gift assets to a beneficiary with special needs without jeopardizing the child’s eligibility for much needed state and federal assistance programs such as Medicaid and/or Food Stamps (TANF).
Charitable Trusts
Charitable trusts benefit organizations or the public in general. Charitable lead and charitable remainder trusts combine a charitable and non-charitable beneficiary into one trust. Along with fulfilling a philanthropic goal, charitable trusts are also frequently used to help lower an estate’s exposure to federal gift and estate taxes.
Spendthrift Trust
A spendthrift trust is a trust that is established for a beneficiary who may not manage money well for one reason or the other. Provisions within the trust prevent the beneficiary from selling or encumbering his/her interest in the trust. It is also protected from creditors of the beneficiary until such time as the trust property is distributed out of the trust and given to the beneficiaries.
Contact Essex Junction Trust Attorneys
For more information, please attend one of our upcoming FREE webinars. If you have questions or concerns about incorporating a trust into your estate plan, contact the experienced Essex Junction trust attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.
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