Trusts are one of the must-haves of a well-crafted estate plan. Revocable living trusts are particularly recommended thanks to their flexibility and ability to bypass probate. However, revocable trusts are just one of the many trusts you can add to your estate plan. These aren’t the only types of trusts that can skip probate, either.
In this blog, we explore four kinds of trusts that may help you create a more effective and fine-tuned estate plan.
Special needs trust
A special needs trust can help you provide ongoing financial support for loved ones with disabilities while preserving their eligibility for critical government benefits.
High income can disqualify people with disabilities from assistance programs like Medicaid or Social Security. However, any funds or assets you leave behind for your loved one through a special needs trust do not count toward their income requirements.
Spendthrift trust
If you are worried about your loved one squandering or recklessly spending the inheritance you leave them, consider setting up a spendthrift trust. With this kind of trust, you can set conditions for your beneficiary to access the funds, such as:
- When they can receive the funds
- How much money they may access
- Exceptions to the conditions, such as emergencies
Generation-skipping trust
If your children live comfortable lives or have stable, well-paying jobs, you may want to leave your inheritance to your grandchildren instead. You can use generation-skipping trusts to leave behind assets to your great-grandchildren or anyone at least 37 years younger and who isn’t your spouse. Additionally, generation-skipping trusts may help you minimize your estate taxes.
Totten trust
Totten trusts are also known as a “poor man’s trust.” It’s basically a payable-on-death (POD) account or a bank account with a named beneficiary. When you open a POD account, you designate someone who will inherit the account and all it contains upon your death. Since the account automatically transfers to your beneficiary upon death, Totten trusts or POD accounts also avoid probate.
Find the right trusts for your needs
Trusts are not a one-size-fits-all solution. Speaking with an experienced estate planning attorney can help you identify the ideal trusts for your situation. They can guide you in creating a complete estate plan that protects your legacy and your loved ones.