Trusts are a valuable tool for estate planning and asset protection. Understanding the different types of trusts available is important to ensure that you make the right choice for your unique needs and goals. Here is a comprehensive guide to the most common types of trusts:
Revocable Trusts – Also known as “living” or “inter vivos” trusts, revocable trusts are created during the lifetime of the donor. The donor retains complete control over the trust and has the ability to amend, revoke, or terminate the trust at any time. However, the assets in a revocable trust are counted for purposes of determining Medicaid eligibility.
Irrevocable Trusts – Irrevocable trusts are created during the lifetime of the donor but cannot be amended or changed after creation. The donor may retain the right to receive income from the trust property. Irrevocable trusts are often used for Medicaid planning.
Testamentary Trusts – Testamentary trusts are created through a will and take effect only after the death of the donor. Testamentary trusts are a public document and are part of the probate process. They are useful for accomplishing estate planning goals, such as providing funds for a surviving spouse without jeopardizing Medicaid eligibility.
Supplemental Needs Trusts – Supplemental needs trusts are created to provide for the continuing care of a disabled spouse, child, relative, or friend. They allow the beneficiary to access the trust assets without losing eligibility for public benefits programs such as Supplemental Security Income, Medicaid, and low-income housing.
Whether you are seeking to protect your assets or make provisions for your loved ones, it is essential to understand the different types of trusts available and make an informed decision.