Wednesday, 28 August 2019

A trust is a tool that can be used to manage assets for individuals or group of people.

Regardless of your financial situation, it's worth understanding the different types of trusts and determining whether you need one.

Types of trusts

Trusts are legal agreements used in estate planning to manage assets. You may use one to set aside certain assets for when you can no longer manage them directly, or to ensure loved ones are taken care of after you pass away.

There are a number of different types of trusts. Each can be specialized for certain situations and to meet certain needs. Here are some common ones:

Revocable trust - A revocable trust allows you to modify or revoke the trust at any time while you are alive. If you become mentally impaired, a successor trustee takes over managing the trust's affairs. This is someone selected by you when drawing up the trust. When you pass away, the trust becomes irrevocable. The successor trustee steps in to manage the trust's final debts and taxes. They then distribute the remaining assets to the trust's beneficiaries.

A revocable trust is an option for someone who wants certain benefits of a trust, but doesn't want to set everything in stone from the outset. Revocable trusts can be useful for those seeking reassurance that their assets will be managed properly when they no longer have the ability to do it themselves.

Irrevocable trust - As the name suggests, an irrevocable trust cannot be changed or revoked once finalized. By creating one, you effectively relinquish your ownership rights to the assets you place into it. Irrevocable trusts can come with special benefits, including protection from creditors and tax advantages.

Living trust - A living trust is any type of trust that takes effect during your lifetime. A living trust can be revocable or irrevocable. A living trust enables you to transfer your assets to the trust's beneficiaries upon your death without beneficiaries having to go through Probate Court.

Testamentary trust - Unlike a living trust, a testamentary trust is created through a deceased person's will. A testamentary trust is irrevocable and does not bypass the probate process.

Other trusts - Depending on your needs, there are other trusts that can help. For example, a Special Needs trust is designed specifically to benefit some with a disability.

Requirements for trusts vary by state so please check with your legal and tax advisors to learn more about your options and what's best for your situation.

The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or financial advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates. 

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