When looking for ways to protect assets, one of the most popular methods can be found with trusts. Once assets are placed into a trust, it becomes the trust’s property and is subject to the rules laid out by the trust itself. Whilst the ‘trustee’ is the holder of the title, the ‘beneficiary’ will see the benefits of the trust. Although there are two main types of trust - revocable and irrevocable - there are a couple of others too so let’s take a look.
Revocable - As the name suggests, this is a trust that can be altered, modified, or completely removed throughout its lifetime. Sometimes known as a living trust, the trustee can add and remove certain assets over the years and can be helpful towards avoiding probate. If the assets are placed into the trust and owned by the trust at the time of the trustee’s death, probate will not be necessary.
Irrevocable - On the other hand, an irrevocable trust is one that cannot be altered in any way during a lifetime nor can be it be revoked. Once a property or asset is placed into the trust, it cannot be removed or taken out which means that this decision is a heavy one and should be considered deeply. Again, this will help to prevent probate if the trustee has placed an asset into the trust before death.
Asset Protection - When creditors are on the attack and you need to protect certain assets from them, this trust is used as they will no longer have access. Normally, these will be irrevocable for a certain amount of time and then returned to the trustee once they are safe from creditors. Once the ‘attack’ is over, they can regain control of the assets.
Special Needs - Ultimately, this trust is set up for people who are allowed government benefits so that the beneficiary isn't disqualified from the benefits. Thanks to Social Security rules, this is completely legal and permitted across the United States. Normally, an inheritance is subject to various taxes if government benefits have been received but a special needs trust prevents this.
Constructive - As an Implied Trust, it is first established by a court and will then be determined from various circumstances and facts. When in court, they may decide that even though a property wasn't in a trust, there was intention and should therefore go to a particular person.
Although these are the main five options, there are also a number of other types such as Tax By-Pass, Totten, and Spendthrift. All in all, trusts act to protect an asset to then be given to a beneficiary or back to the trustee at a later point in time. If you need advice or feel as though you would benefit from something like this, be sure to contact a local finance professional who will be able to advise you on your own unique circumstances.