If you have not yet decided what to do with your assets after your death, you certainly are not alone. In fact, according to Caring.com’s 2021 survey, roughly two out of every three American adults do not have an estate plan.
Regardless of your health, age or income level, there is no time like the present to plan your estate. While you probably have many options for doing so, setting up a trust often makes a great deal of sense.
What does a trust do?
A trust is simply an estate planning tool that uses a trustee to manage your assets. The trustee, who may be a financial professional or a layperson, has a legal duty to follow your instructions to the letter. That is, he or she must distribute your wealth according to your wishes.
What are the different types of trusts?
There are many types of trusts, each of which has different advantages and potential drawbacks. If you create an inter vivos trust, the trust is active during your lifetime. A testamentary trust, by contrast, goes into effect after you die.
Your trust also may be revocable or irrevocable. With a revocable trust, you can usually change or terminate the trust at any time. An irrevocable trust, however, is often difficult to end without a court order.
Which trust is right for you?
Deciding what type of trust fits into your overall estate plan can be challenging, as your decision likely depends on your financial situation, your goals and the needs of the trust’s beneficiaries. Ultimately, though, by researching trust types and picking an optimal one, you maintain control over what happens to your assets.