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A trust is a relationship between two parties: a trustor and a trustee. The trustor gives the trustee the right to hold possession of certain property or assets for the benefit of specified third parties, otherwise known as beneficiaries.
There are a number of different types of trusts that serve separate purposes, and our Arkansas estate planning team gives you a comprehensive guide below.
Living Trusts
Trustors place their assets and property into living trusts through a trustee. These assets are then transferred to the named beneficiary at the time of the trustor’s death. The trustee in charge of handling assets distributes the property to the beneficiary at this time as well. There are several benefits to living trusts, which include:
- Protects against the incapacity of grantors and beneficiaries
- They are not vulnerable to probate
- Hold provisions for healthcare and end-of-life
- Grants immediate access to assets for beneficiaries
- They are not made public documents, unlike a will
Living trusts can also be made revocable or irrevocable. In revocable living trusts, the trustor can name themself as the trustee to take control of any assets within the trust. This is also helpful in case the trustor wishes to amend any of the terms in the trust. Circumstances can change easily, making revocable living trusts a valuable resource to compensate for life developments.
Irrevocable living trusts, however, do not allow the trustor to change or amend the terms of the trust or the assets held within it over the course of their lifetime. Revocable living trusts also name the trustee as the legal owner of the property, but this does lower the trustor’s overall estate tax.
Charitable Trusts
Charitable trusts are designed to allow trustors to directly benefit a charity or non-profit when they pass away. This type of trust is available to anyone holding any appreciated assets holding a low basis, such as stocks or real estate. Donors utilizing this type of trust are typically recognized by the charities themselves and are even able to sell assets without incurring capital gains taxes.
Special Needs Trusts
These trusts are pursued by trustors to be able to provide monetary funding to their loved ones with special needs. One of the biggest advantages of special needs trusts is the ability for beneficiaries to maintain receiving government aid while being able to access funds from the trust. There are two different types of special needs trusts:
- Pooled trusts
- A self-settled special needs trusts
Pooled trusts are often pursued when the beneficiary with special needs is over the age of 65 or is under the age of 65 without any living parent, grandparent, or guardian. These trusts are also managed by non-profit organizations where the trustee opens a sub-account for each individual with special needs, and assets are pooled together for investment purposes.
A self-settled special needs trust is a trust that an individual creates and funds with their own assets and resources. This trust must also be created by a parent, grandparent, or guardian, but not the special needs beneficiary themself in order to receive the funds.
Testamentary Trusts
These are trusts that are established alongside a will. One of their main functions is to appoint a trustee to manage any assets placed within the will. These trusts are often used when their beneficiaries are disabled individuals or those with special needs. Testamentary trusts are also beneficial in reducing estate tax liability as well.
Contact our Arkansas Estate Planning Team Today
We understand that planning for the future can be a daunting and stressful task. At Martin Attorneys, PA, we have the experience and compassion you need to find success for yourself and your loved ones.
To find out more about how we can help you establish the perfect trust for you, contact us today through our website or give us a call at (479) 888-2039 to schedule your compensation.