Trusts have been around for thousands of years and can serve a variety of purposes.
Most people think that Trusts are only for the very wealthy, but this not so. Wealthy people use trusts for various reasons, including tax avoidance. However, not-so-wealthy people can still take advantage of Trusts for reasons other than tax avoidance.
There are many types of Trusts, though all Trusts have certain common elements. For example:
- The “Grantor” (or “Settlor”) is the person that creates the Trust and typically funds the Trust. The Grantor makes the rules by which the Trust operates.
- The “Trustee” is in charge of administering the Trust. The Trustee makes financial decisions regarding investments for the Trust and disbursements, all in accordance with the rules of the Trust as set forth by the Grantor.
- A Trust can have one or more “Beneficiaries”, who are the people that receive the benefit of the Trust funds.
Each type of Trust has a different purpose, and therefore has different potential benefits. Some examples of Trusts include:
- A Special Needs Trust protects assets for individuals with special needs. It allows them to have some money for “extras,” while preserving their eligibility for government benefits.
- In conjunction with the rest of your Estate Plan, a Credit Shelter Trust can reduce (or perhaps even eliminate entirely) death taxes due from your Estate when you die.
- Normally, can only have a very minimal amount of assets in order to be eligible for Medicaid benefits. Given the right planning, a Medicaid Trust can be used to protect assets from Medicaid.
These are just a few types out of the wide variety of Trusts that we have created for clients over the years. Trusts are very flexible, and can be used for many different purposes. We work with our clients to determine what type of Trust is best for them based on their unique situation and goals, be they personal, financial, or testamentary.