People often misunderstand that a will and a trust are not the same thing. While they both help dictate how assets are distributed after someone passes away, trusts often have more benefits. Trusts are able to circumvent probate, estate taxes and will disputes.
People commonly make revocable trusts. The grantor can alter their revocable trust at any point to add or remove assets and beneficiaries. Once the grantor passes away, the revocable trust becomes irrevocable and can not be altered without the beneficiary’s consent.
While a revocable trust may be most people’s first choice, some trusts have unique wording that gives grantors more options. Here’s what should know:
4 types of trusts to consider making
A trust can have special wording that allows the grantor to pick and choose how their assets are handled. Here are a few trusts for unique situations:
- Charitable trust: A grantor can use a trust to give a private organization, charity or program assets. These assets could be distributed to these groups at pre-designated times with specific increments by using a charitable trust.
- Generation-skipping trust: A grantor may have given to their children, but also wish to give to their grandchildren. A generation-skipping trust can bypass a prior generation for the benefit of grandchildren or great-grandchildren.
- Pet trust: A grantor who fears they will outlive their pets can put assets into a pet trust. Assets in a pet trust may be used entirely for the care of their pet’s needs, such as grooming, feeding, training and medication.
- Spendthrift trust: A grantor may believe that a beneficiary may misuse their assets for gambling, addictions or risky investments. A spendthrift trust can reduce how many assets a beneficiary receives at once.
Each of these trusts has its potential benefits, but they are not the only ones available to grantors. Grantors looking to make trusts may need to learn about their legal options.