Types Of Trusts – What Are The Differences?

There are a number of types of trust & wills out there, so how do you know which one is best for your particular situation? You don’ t want to get this wrong as it can really effect your inheritors, kids or beneficiaries in quite a negative way. It can definitely feel overwhelming to decide which one is best for you, so in this article we will break things down.

 

#1. Revocable Living Trusts

Revocable living trusts are the “planners” way of handing estate planners, its the type of estate plan that generally affords you the most control and will give you the most advantageous options regarding your estate. One of the biggest benefits to getting a revocable living trust is that it prevents the need for a conservatorship, that is for someone to have to step in and handle things on your behalf. Generally speaking, you don’t want this as it give 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 give your family the ability 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 as the aforementioned method. The first thing that is different about it is the liability issues, with a revocable living trust your beneficiaries are not exposed to liability that ownership comes with, as they are given the assets in a special inheritance trust. You can establish co-trustees as well, and you can yourself carry the title of trustee and act as your own beneficiary. This type of trust utilizes much of the same protections as a 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 to be used under certain circumstances. In this type of trust, what people are hoping to do is make sure that life insurance proceeds are not eaten alive by taxation, so that whoever is inheriting the proceeds can receive most of that money. This can be setup so that upon death, none of the beneficiaries proceeds are taxed whatsoever. 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 distinctly separate, so that one situation does not effect the other. What you are essentially doing is 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 increasing.

 

#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 into a nursing home. Under CA state law, there is an amount of value your property or assets can have in order for you to qualify at all. With this in mind, there are other situations that arise such as having to spend down your assets, or sometimes a lien may be placed on the home in order to recoup the cost of the benefits paid. Many families will opt to protect the home at any cost, so this type of trust will protect your home in the event of a Medi-cal recovery lien that stands to decimate you and your family if you’re not well prepared.