Generally speaking, a person will not lose control over their assets if they put them in a trust, but there are some exceptions. Since domestic asset protection trusts are irrevocable, some control over the assets in these trusts is lost. In addition, irrevocable life insurance trusts that are established when dealing with the potential of high estate tax liabilities after death of a person can cause some loss of control over the life insurance policy. However, most trusts will allow a person to retain control over their own assets while they are alive and competent to do so.
There are probably just as many trusts as there are clients who need them, but they can be pared into some common and basic categories.
One type of trust is called a joint trust, which is typically created and used by married couples when there is little or no concern about estate tax liabilities. A couple will place all of their assets in a joint trust so that when one spouse dies, the other can manage those assets.
There is also a special needs trust, which is for family members who are disabled and receiving public assistance benefits such as Social Security Disability or Supplemental Security Income. These kinds of trusts are designed to allow a special needs person to retain public assistance benefits while still enjoying some of the financial benefits of the trust.
Another type of trust is called a homestead trust, which is established by someone who only wants to place their home or vacation property in a trust in order to ensure that it stays in the family for a long time and is not sold by succeeding family members.
There are also marital-deduction and A-B trusts, which are set up so that surviving spouses can enjoy the benefit of the trust while knowing that, once the surviving spouse passes, whatever remains in the trust will be left to the beneficiaries of their choosing.
In most cases, the terms of a trust can be easily changed during the grantor’s lifetime. Revocable trusts can be changed at any time so long as the grantor is alive and competent to do so. For example, a person may choose to change the trustee powers provisions, the designated trustee, the beneficiaries, or the amount of money or distribution scheme for the beneficiaries. Alternatively, they could choose to revoke the trust entirely.
The documents that are needed in order to modify or revoke a trust are fairly simple, so once a trust has been established, amending it is a relatively easy process. However, a person should return to the attorney who drafted the trust or to another qualified estate planning attorney in order to ensure that it is amended or revoked correctly.
A person is certainly permitted to have more than one trust; whether or not they should, depends upon the details of their particular circumstance. More than one trust may be helpful when dealing with blended family situations in which spouses want to provide for their own children from a prior marriage as well as their new spouse, but not necessarily for their new spouse’s children. While a pre-nuptial agreement can be very important in such situations, a solution could also be worked out by establishing separate trusts.
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