Types Of Trusts – What Are The Differences?

Types Of Trusts

#1. Revocable Living Trusts

Revocable living trusts are the “planners” way of handling estate planners. This type of estate plan generally affords you the most control and will give you the most advantageous options regarding your estate. One of the biggest benefits of getting a revocable living trust is that it prevents the need for a conservatorship, that is, for someone to step in and handle things on your behalf. 

Generally speaking, you don’t want this as it gives you the least amount of control, and there is the probability that you will have to go to probate court and all of the associated fees that go along with that. A revocable living trust will allow your family to handle your estate privately and at your discretion.

#2. Personal Asset Trust

A personal asset trust is another type of trust that some people may choose to opt for, and it involves a few differences from the method above. The first thing that is different about it is the liability issues. With a revocable living trust, your beneficiaries are not exposed to ownership liability, as they are given the assets in a special inheritance trust. 

You can also establish co-trustees, carry the title of the trustee, and act as your beneficiary. This type of trust utilizes much of the same protections as foreign and domestic asset protection trusts, so it is extremely secure and provides unique trust benefits for your estate.

#3. Life Insurance Trust

This is an important trust that we can use under certain circumstances. In this type of trust, people hope to ensure that life insurance proceeds are not eaten alive by taxation so that whoever inherits the proceeds can receive most of that money.

Life Insurance Trust

You don’t want a situation where the life insurance proceeds are then absorbed back in to pay any estate-related fees; you want to keep these two things separate so that one situation does not affect the other. You are setting the life insurance payout differently from the estate, so the two are separate. Any appreciation of the value of the insurance policy is not subject to income tax increase.

#4. Medical Protection Planning

Another type of estate planning that you can implement if you so desire is medical protection planning. This is important if you have someone who is entering a nursing home or has other arrangements similar to this. This takes effect when someone has Medi-Cal and tries to enter a nursing home. 

Under CA state law, there is an amount of value your property or assets can have for you to qualify. With this in mind, other situations arise, such as spending down your assets. Many families will opt to protect the home at any cost, so this type of trust will protect your home in case of a Medical recovery lien that stands to decimate you and your family if you’re not well prepared.