One of the many reasons that people add trusts to their estate plans is to preserve our most valuable assets. The property in your name at the time of your death can be vulnerable to claims by creditors, Medicaid estate recovery program and tax authorities.
Testators most also confront the possibility that their family members will squander an inheritance and plan to protect their loved ones from their worst impulses. There are multiple kinds of trusts available, and each of them can be beneficial when you need to protect your assets.
What are the kinds of trust people most commonly use to protect their assets when they create or update their estate plans?
An irrevocable trust
When you create a revocable trust that you can change, dissolve or withdraw assets from while you are still alive, that trust may not do very much to protect your property from creditor claims or Medicaid estate recovery. Irrevocable trusts are frequently utilized by those who want to protect their assets from creditor actions as they grow older or after they die.
A spendthrift trust
When your concern is about protecting assets from misuse by the people who inherit them, a spendthrift trust may be what you need to create. For those who have family members who spend their money irresponsibly or have a history of substance abuse, spendthrift trusts allow for careful control over when someone accesses trust assets and the purposes for which they can use those assets.
A special needs trust
When you hope to set aside assets to protect a family member with special needs, a special needs trust can serve the purpose of preventing wasteful use of an inheritance while also helping preserve your loved one’s eligibility for state aid. The assets in the trust won’t be vulnerable to Medicaid recovery, while directly inherited property would be vulnerable after the special needs beneficiary dies.
Those who want to protect their property and loved ones may need to think carefully about what they hope to accomplish with their estate and what they hope to do with their assets. Creating the right estate planning documents can help even those with unique situations achieve their goals.