Will vs Revocable Trust: Why Seniors Need Them
October 5, 2023
3 Types of Trust for Older Adults Part 2
October 19, 2023
Estate planning is an essential financial responsibility for older people. Drafting a will is a common step for many seniors. Trusts are another instrument seniors may use for estate planning. However, there are many different types of trusts.
This post will explain what trusts are and two broader types of trusts seniors may use. It is important to note that this is a complex legal matter, and an attorney should be consulted for estate planning advice.
Common Types of Trust for Estate Planning
A trust is a legal entity a person can create for estate planning purposes. The individual creating the entity is the grantor, and they can transfer assets to the trust. A trust will have a trustee responsible for managing the assets following the terms the grantor outlines.
Trusts also have beneficiaries. At the grantor’s passing, assets go to the beneficiaries following the trust’s terms.
Depending on your needs, trusts can serve various purposes. They can help you avoid probate, limit estate taxes, and ensure the grantor’s wishes concerning their assets. The flexibility of trusts makes them a valuable estate planning tool.
Revocable Trusts
Revocable trusts are some of the more common types of trust for estate planning. Under this arrangement, the senior creates a trust to hold their assets during their lifetime. The grantor can serve as the initial trustee for a revocable trust. That means the senior can maintain control over the assets in the trust. It also means they can revoke the trust or change the terms without permission from the beneficiaries.
Seniors favor these trusts because they still have control over their assets. However, they can still name beneficiaries and outline terms for the distribution of assets upon their passing. You might use it to avoid probate or limit the tax liability of your heirs.
Irrevocable Trusts
With an irrevocable trust, the grantor permanently puts assets in the trust. The grantor cannot be the trustee of the irrevocable trust. The grantor names beneficiaries and sets the terms of the trust at its creation, but there is little they can do to change the trust after establishing it.
Even with limited control, irrevocable trusts can benefit seniors. Like with revocable trusts, they can offer a way to bypass probate and limit estate taxes. The additional benefit is that it can provide financial protection you can’t get from a revocable trust. Irrevocable trusts shield assets from creditors, lawsuits, and other financial issues.
This post is the beginning of a two-part series on trusts for seniors. Check back to learn more in part two.
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