Once you start your estate planning and draft a will, you may need to consider making a trust. A trust is a legal arrangement between you and a trustee. The trustee is responsible for managing trust funds, including distributing assets to beneficiaries and protecting assets from estate taxes, probate and disputes. You could think of a trust as an upgrade to your will, however, the two legal documents can work symbiotically.
Besides asset protection, you can use a trust to make special requests. Here are a few trusts you may want to consider adding to your estate plan:
Incentive trust
You can protect your assets from misuse. You can include a clause in an incentive trust. beneficiaries may need to meet this clause if they want access to trust funds. For example, you could allow a beneficiary to access trust funds only if they graduate from college.
Pet trust
Do you have a pet? You can use a pet trust to set aside assets for the continued care of your dog, cat, bird, fish or exotic animal. Assets can be used for vet bills, shelter, food and grooming.
Generation-skipping trust
If you have grandchildren and you do not think you will be around long enough to see them grow, you could create a generation-skipping trust. A generation-skipping trust passes funds down to beneficiaries 37 and a half years younger than you.
Special needs trust
Trust funds could create issues for beneficiaries who receive supplemental income or health benefits. However, a special needs trust could limit funds so beneficiaries can continue receiving benefits.
To learn more about estate planning, it will be beneficial to seek legal guidance.