Understanding the Different Types of Trusts for Accessing Your Own Money

When considering how to manage and protect your assets, setting up a trust is a common solution. Trusts can offer various levels of control and protection depending on your goals. In this article, we will explore different types of trusts and their benefits, focusing on the most commonly used trust, the revocable trust, as well as other considerations.

1. Revocable Trust - A Living Trust

The most common type of trust that allows for complete control over your money is the revocable trust, also known as a living trust.

You as the Grantor: You are the grantor, trustee, and initial beneficiary of the trust. This means you have full control and can manage the trust assets freely. Flexibility and Control: You can make changes to the trust at any time, which provides flexibility and control. Probate Avoidance: Depending on your state, a revocable trust can help you avoid the probate process. Upon your death, your assets are transferred more efficiently with fewer legal complications.

2. Other Considerations for Setting Up a Trust

While a revocable trust offers many advantages, it's important to consider other details that can impact your decision:

Successor Trustee: In case you become incapacitated or unable to manage your affairs, you need to appoint a successor trustee who can take over the management of the trust. Beneficiary Distribution: Who will receive the trust assets when you die, and when? You can specify whether distributions are immediate or conditional. Dispute Resolution: If beneficiaries disagree or disputes arise after your death, it's crucial to have clear guidelines on how these issues can be resolved. Creditor Protection: If you are worried about your creditors accessing the trust assets, other types of trusts like an Asset Protection Trust may be more appropriate.

3. Self-Settled Trust - Asset Protection Trust

A self-settled trust, also known as an asset protection trust, can be used to protect your assets from creditors. However, this type of trust requires a trust protector and a corporate trustee, and it should be used cautiously.

Protection from Creditors: If you find yourself in a situation where your creditors might target your assets, a self-settled trust can help protect these assets. Complexity: This type of trust is more complex and often requires professional assistance to set up and manage effectively. Limited Availability: The availability and effectiveness of self-settled trusts vary by state and legal jurisdiction, so it's important to consult with a legal professional.

4. Starting Point - Defining Your Goals

Before deciding on the type of trust to set up, it's essential to define your goals:

Financial Security: Protect your assets from creditors or manage them in a way that ensures they are distributed according to your wishes. Control: Maintain control over your assets while ensuring they are managed effectively. Inheritance Planning: Plan for the distribution of assets to your beneficiaries, either during your lifetime or after your death.

Starting with a self-settled trust or a revocable trust can be a good initial step. It's critical to understand the specific details of your situation and consult with a knowledgeable attorney to ensure your trust meets your needs.

Remember, understanding the different types of trusts and their implications is key to making informed decisions about your financial future. A professional advisor can help guide you through the process and provide custom solutions tailored to your unique circumstances.