Trusts are an important legal tool to protect your finances and your family. But while many Americans need only one overall trust to provide asset protection, others can benefit from a variety of specialized trusts. What type of asset-specific trusts might you need to incorporate into your plan and why? Here are a few of the most likely candidates.
1. Trusts for Blended Families
Couples with children from prior relationships face unique estate planning challenges due to inheritance laws. If you or your spouse want to leave assets specifically to their biological children, an asset-specific trust for these inheritances can protect them from becoming accidentally or intentionally mingled with non-biological children's inheritances over time.
2. Trusts for Pets
Do you have a beloved pet that you want to be taken care of after your passing? Rather than simply leave the pet to a new owner in a will and hoping for the best, many pet owners create a separate trust for the pet's care. This trust can name a guardian, leave money for its care, and even specify care and housing requirements that a trustee will see are followed.
3. Special Needs Trusts
Families with a family member who will have lifelong special needs do well to create one or more special needs trusts to provide for that individual. A special needs trust can be funded by one person, such as a parent, or you can work with other family members who wish to contribute. It names a trustee to manage assets and provide for daily living or medical care. Special needs trusts can be structured to avoid impacting the beneficiary's eligibility for public or other benefits.
4. Charitable Trusts
If you have specific plans for your charitable donations, a trust ensures they are carried out. While those who want to make simple cash donations may not need the added complexity of a trust, you should consider one if you are donating a valuable asset that needs to be managed, wanting to create ongoing endowments, or wanting to give items after other beneficiaries no longer need them.
5. Generation-Skipping and Tax Reduction Trusts
If your estate could be subject to estate or inheritance taxes, you may want to break it up using generation-skipping or irrevocable trusts. These trusts reduce the amount of money in your main estate or revocable trusts to avoid the tax threshold. They can also reduce future taxes for your heirs.
Want to know more about using trusts for limited and specific purposes? If so, start by meeting with a wealth management service that specializes in estate planning using trusts. Together, you can craft a trust plan that fits your particular goals and interests. Make an appointment today.
