A trust is a legal plan for managing property, but not all trusts are the same.
Different trusts are used for different goals. Some trusts are simple and common. Others are more advanced and are used for specific family, tax, business, or asset protection reasons.
Living Trusts
A living trust is created during a person’s lifetime.
It is often used in estate planning to explain who should manage property during life, what should happen if the person becomes unable to act, and who should receive property after death.
A revocable living trust can usually be changed while the person who created it is alive and able to make decisions.
Irrevocable Trusts
An irrevocable trust is usually harder to change after it is created.
People may use irrevocable trusts for more advanced planning goals. These may include tax planning, asset protection, long-term family planning, or planning for specific property.
Because these trusts can limit control, they need careful planning.
Special Purpose Trusts
Some trusts are created for a specific purpose.
A special needs trust may help support a person with a disability without disrupting certain benefits. A charitable trust may be used to support a charity. A dynasty trust may be used to help preserve family wealth for future generations.
Other trusts may be used for business planning, real estate, life insurance, or tax planning.
Choosing the Right Type of Trust
The right trust depends on the person’s goals.
A person may need a simple living trust, a more advanced trust, or more than one type of trust. The best choice depends on the person’s property, family situation, business interests, tax concerns, and long-term planning goals.
