For many people, estate planning is something that gets pushed off for years. In some cases, people simply do not want to think about what happens after they pass away. In others, they assume that because they already have a will, there is nothing more they need to do. However, the truth is, there are several estate planning tools available that can help protect your assets, preserve wealth for future generations, and ensure your wishes are carried out exactly as intended. One of the most important estate planning tools available is a trust. That being said, because there are various different types of trusts, many people are unsure of which option is best for them and their families. Please continue reading and speak with an experienced Buffalo estate planning lawyer from Raimondo & Sundquist LLP to learn more about some of the different types of trusts and how they may benefit you.

What Is a Revocable Living Trust?

A revocable living trust is one of the most commonly-used estate planning tools, largely because it provides individuals and families with flexibility. Essentially, a revocable living trust is a trust that can be changed, amended, or revoked at any time during the creator’s lifetime. This means that as circumstances in your life change, your trust may change as well. Some of the primary benefits associated with revocable living trusts are as follows:

  • Assets placed into the trust may avoid the probate process after your death
  • A successor trustee may step in and manage assets if you become incapacitated
  • The trust generally allows for a greater level of privacy than a traditional will
  • You may continue controlling and managing the assets placed into the trust while you are alive

Many people create revocable living trusts because they want a smoother transition of assets to their loved ones after they pass away. Probate can often become time-consuming, and because probate proceedings are public, some individuals prefer to keep their financial affairs private whenever possible. That being said, because you still maintain control over the trust assets, revocable trusts generally do not provide protection from creditors or certain estate tax consequences.

What Are Irrevocable Trusts Used For?

Irrevocable trusts are considerably different from revocable living trusts. Once an irrevocable trust is created and funded, it is generally extremely difficult to modify or revoke. Though giving up control over assets may initially sound concerning to some people, irrevocable trusts can provide several substantial legal and financial advantages. In many cases, irrevocable trusts are used for the following reasons:

  • To potentially reduce estate tax liability
  • To shield certain assets from creditors or lawsuits
  • To preserve wealth for future generations
  • To assist with Medicaid planning or long-term care planning
  • To remove appreciating assets from a taxable estate

When assets are transferred into an irrevocable trust, they are no longer legally considered part of the creator’s personal estate. Because of this, these trusts are often utilized by individuals who are engaging in advanced estate planning strategies or who are attempting to preserve significant assets for their beneficiaries.

There are also several specific types of irrevocable trusts that may serve different purposes. For example, some people establish charitable trusts to support charitable organizations while potentially receiving tax benefits in return. Others create life insurance trusts to help beneficiaries avoid certain estate tax burdens associated with life insurance proceeds.

Which Trust May Be Best for My Family?

There is no universal answer to this question, as every family’s financial circumstances and goals are different. Additionally, there are several other types of trusts that individuals frequently use, including:

  • Special needs trusts, which are designed to provide for a disabled loved one without jeopardizing eligibility for government benefits
  • Testamentary trusts, which are created through a will and only take effect after death
  • Spendthrift trusts, which may help protect beneficiaries from irresponsible spending or creditor claims
  • Charitable remainder trusts, which may provide income to beneficiaries before eventually transferring assets to a charitable organization

With the assistance of a knowledgeable New York estate planning lawyer, you can determine which estate planning tools are best suited to protect both your assets and your loved ones for years to come. Contact our firm for help today.