Estate plans come in many shapes. They have to take your unique situation and needs into account. Each estate plan has to reflect your wishes and should make things as easy as possible for the people who are included in the plan.
At a minimum, you will need a will. You might also need to have trusts set up to make the transfer of assets easier. There are a host of different types of trusts, and each of these has a different purpose. Before you jump into the estate planning process, you should understand a few points about trusts.
Revocable versus irrevocable
Trusts are set up as revocable or irrevocable. Some types of trusts can only be set up in one of these manners. For example, a special needs trust is always irrevocable. This is an important consideration when you are getting your estate plan together.
A revocable trust is one that can be changed. These are useful for some people because the terms can be altered or revoked if there is a need to do so. You set up this type of trust with the goal of helping your loved ones to avoid probate when you pass away. Also known as a living trust, this type of trust doesn't offer any type of protection from creditors who might come after your assets to satisfy debts.
Irrevocable trusts can't be changed once they are established. These help your loved ones to avoid probate. Unlike revocable trusts, irrevocable trusts offer asset protection. Once assets are placed in the trust, creditors can't come after them if you have a debt that you are unable to pay. Even though you created the trust, you can't pull the assets out if you decide that you don't want them to remain there.
Trusts for specific purposes
Some trusts have specific purposes and can only be used for those reasons. One example of this is a special needs trust. This safeguards the rights of individuals with special needs to qualify for needs based programs. Another example is a life insurance trust, which can transfer the proceeds from a policy to one or more beneficiaries when the insured person passes away. A spendthrift trust is one that doesn't allow the beneficiaries of the trust to give away or sell one's interests in the trust. Charitable trusts help you to pass assets on to favorite charities when you die. Other types of trusts are also available, so make sure that you discuss your needs to determine what types of trusts can meet your goals for the estate.