Estate planning is an important task that can determine what will happen in the event of your death. Having a plan can protect your family and preserve your assets. One common tool in estate planning is a trust. A trust creates a plan that protects your assets, ensures the distribution of those assets according to your wishes and can save time, reduce paperwork and avoid unnecessary taxes.
There are five main types of trusts in Massachusetts. Which you choose will depend on your estate planning goals.
1. Revocable Trust
This is a popular choice since you can modify, change or terminate it whenever you wish. You retain complete control over the trust for your lifetime and do not need the beneficiary’s permission to amend it at will.
2. Irrevocable Trust
You forfeit all rights to the assets in the trust as soon as you create it. You cannot ever modify or terminate this type of trust.
3. Irrevocable Life Insurance Trust
This trust removes your life insurance from your estate and can protect your beneficiary from paying unnecessary taxes.
4. Special Needs Trust
If you have a loved one with a disability, this trust can supplement any benefits that they receive from the government without causing them to lose their benefits or services.
5. Charitable Trusts
There are two subtypes. A charitable leads trust provides interest payments to charities of your choice for a specified period of time; afterward, any monies left in the trust can pass to other beneficiaries. A charitable remainder trust reverses that process.
Including a trust in your estate plan and choosing the right type depends on many factors. Consult with experienced professionals to help you make the right choice.