What type of trust is right for my estate plan?

When considering the addition of a Trust Agreement to your estate plan, it is easy to become overwhelmed by the many trusts that are available. It is important to choose the right trust type in order to ensure that it works as intended and fits your estate plan. Consult an estate planning attorney to determine the best type of trust for your plan. A trust is a legal relationship in which property is held for the benefit of a third party by one party. The person who creates the trust is called the “Settlor”, the “Trustor”, or the “Grantor”. The Settlor transfers the property to the Trustee appointed by the Settlor. A Trustee’s main job is to protect, invest and administer trust assets as per the trust agreement. Trusts can be divided into two categories: testamentary and living trusts. Living trusts can be further divided into irrevocable and revocable living trusts. Living trusts can be further divided into revocable and irrevocable living trusts.What Type of Trust Should I Create?Testamentary Trust:

A testamentary trust is created through a provision in your Last Will and Testament and only activates upon your death. This trust can be used to provide for minors, manage assets for beneficiaries that are not financially responsible or address other needs specified in your Will. Because this type of trust is not administered during your lifetime, it can be less expensive than other options.

Revocable Living Trust:

A revocable living trust is a flexible estate planning tool that allows you to manage your assets during your lifetime and distribute them after your death without the assets becoming involved in the probate of your estate. You can amend or revoke this trust at any point in time. A trust allows you to maintain privacy in regards to asset distribution details. A revocable trust can also be used to plan for incapacity. If asset protection is among your goals, however, a revocable trust is likely not the right type of trust for your plan.

• Irrevocable Trust: An irrevocable trust cannot be modified or revoked by the Settlor once it is established, which is something you should understand and consider before choosing this type of trust. The irrevocable trust is a powerful tool for asset protection and tax planning. By transferring assets into an irrevocable trust, you remove them from your taxable estate and protect them from creditors.
• Special Needs Trust: A special needs trust is specialized irrevocable trust that is designed to benefit a person with disabilities without affecting their eligibility for government assistance programs such as Medicaid or Supplemental Security Income (SSI). This trust will ensure that your loved ones with special needs have financial support, while still preserving their eligibility for essential benefits. A special needs trust must be governed by complicated laws and regulations. A properly drafted SNT, however, can be an invaluable addition to your estate plan.
• Charitable Remainder/Lead Trust: A charitable remainder or charitable lead trust allows you to donate to a charitable organization while providing income to yourself or other beneficiaries for a specified period. After the trust term is over, the remaining assets are given to the designated charity. This type of trust can be a powerful tool if philanthropy is important to you as well as for tax avoidance.
• Spendthrift Trust: A spendthrift trust protects beneficiaries from creditors and poor financial decisions by giving the Trustee discretion over distributions. This trust can be useful if you are concerned about the beneficiary’s ability manage their inheritance responsibly. It can also provide for staggered distributions instead of gifting a beneficiary a large lump sum inheritance.
• Can We Help You Choose the Right Type of Trust for Your Estate PlanFor more information, please download our FREE estate planning worksheet. Contact an Indianapolis estate planning attorney by calling
• Frank & Kraft or

(317) 684-500

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