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Trusts: Asset Management Solutions and Asset Protection Strategies
A Modern Guide for the Modern Client
​You've probably heard the term "trust" thrown around in movies or financial articles, but what does it really mean for you? If you're building a career, buying a home, or starting a family, it's time to get a grip on this powerful financial tool. While a trust might sound like something only for the super-rich, it's actually a versatile tool that could benefit you more than you think.
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This article will demystify trusts, focusing on the ones you're most likely to encounter and helping you decide if one is right for your goals.
What Exactly is a Trust?
Think of a trust as a legal container for your assets—like real estate, investments, or even personal belongings. You (the "grantor" or "settlor") place your assets into the trust, which is then managed by a third party (the "trustee") for the benefit of your chosen beneficiaries (like your kids, a charity, or even yourself).
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The key takeaway? A trust allows you to control how your assets are managed and distributed, both during your lifetime and after you're gone.
Why a Trust Might Be Right for You (or Not)
While a will is a great first step in estate planning, a trust offers a few key advantages, mainly avoiding the public and often time-consuming process of probate court. This can save your loved ones a lot of time, money, and stress down the road.
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However, trusts aren't a one-size-fits-all solution. They come with a cost for setup and ongoing administration. If your assets are relatively straightforward (e.g., a simple savings account and a car), a will might be all you need. The decision really boils down to your goals and the complexity of your financial life.
The Most Common Types of Trusts: A Quick Breakdown
1. Revocable Living Trust
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What it is: The most flexible type of trust. You can change it, add to it, or even dissolve it at any time during your life. You often act as your own trustee.
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Best for: Anyone who wants to maintain control over their assets while planning for the future. It's a popular choice for avoiding probate and managing assets if you become incapacitated.
2. Irrevocable Trust
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What it is: Once you create this trust, you've essentially given up control of the assets you place inside it. You can't change the terms without the consent of the beneficiaries.
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Best for: High-net-worth individuals or those who want to protect assets from creditors and reduce estate taxes.
3. Irrevocable Life Insurance Trust (ILIT)
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What it is: A specialized irrevocable trust designed to own a life insurance policy. When you pass away, the death benefit is paid to the trust, which then distributes it to your beneficiaries.
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Best for: Individuals with significant estates who want to ensure their life insurance payout isn't subject to estate taxes.
4. Special Needs Trust (SNT)
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What it is: A trust designed to hold assets for a loved one with a disability. It's carefully structured so the assets do not interfere with their eligibility for government benefits like Medicaid or Supplemental Security Income (SSI).
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Best for: Anyone with a family member who has a disability and receives government assistance​
Your Next Step: Don't Wait, We Educate
Choosing the right type of trust is a personal decision that depends entirely on your specific goals. Do you want to avoid probate? Protect your assets? Provide for a loved one with a disability? Your answers will guide your path.​Ready to explore your options? We have a wealth of resources to help you understand what's best for your situation. Call our Washington and Montana estate planning attorney to get personalized guidance on your trust and estate planning needs.
The Alphabet of Trusts
Each trust has a specific purpose; for everyday planning, many people use an RLT (Revocable Living Trust). When it comes to philanthropy, a CRT (Charitable Remainder Trust). To pass down a home, you might use a QPRT (Qualified Personal Residence Trust) to minimize taxes.
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