When you are creating an estate plan, you might realize that you have to create trusts to get the assets disbursed in the way you want. Once you come to this realization, you will have to determine what type of trust you need to establish. This is a big decision that you need to make, because different trusts have different purposes and offer different protections.
Some people are concerned about creditors being able to come after their assets. An asset protection trust can help to prevent this from occurring. These trusts are irrevocable, so make sure that you understand how placing assets in this type of trust will impact you and the beneficiaries.
Another consideration is a family member who is reliant upon needs-based programs like Medicaid. Getting an inheritance could push the person over the asset limit for these programs. Instead, you can leave the assets in a special needs trust, which will help to benefit them in a controlled way. If you use this type of trust, make sure you clearly state that the trust is supplemental and not intended as a primary source of income.
Before you establish a trust, you need to determine if it is a revocable or an irrevocable trust. The revocable trust is one that you can change or even revoke later. The irrevocable trust must remain as-is and can't be altered or revoked in the future.
A trust is only one component of an estate plan, so make sure you think about all of the ways you want to have the plan work for your family. You can then create a personalized plan.
Source: FindLaw, "Types of Trusts," accessed Nov. 17, 2017