If you have significant assets such as real estate or liquid capital, you may want to consider the estate planning tool know as a trust. A trust is an arrangement which you can create which allows you to transfer title of your assets and to plan for certain tax consequences of allowing those assets to go through probate. A trust is also an excellent way of avoiding conflict between your heirs over the meaning of a will, or how an estate will be settled by your executor.
However, there are many different types of trusts in Virginia, and it is important that you have a basic familiarity of these trust types to help you understand your lawyer’s advice.
Revocable v. Irrevocable Trust
A living trust is a type of trust that you create during your lifetime. There are two major types of living trusts; revocable and irrevocable trusts. With either type of trust, your assets are transferred into the ownership of the trust. Technically, you no longer own the property that is put in the trust.
The difference between the two trust types boils down to how much control you maintain over the trust after it is created. A revocable trust allows you to make changes to the trust during your lifetime. For example, if you decide you want to dismantle the trust.
In contrast, an irrevocable trust cannot be dismantled, and the property remains in the trust during your lifetime. There are several benefits to an irrevocable trust depending on the value of your estate and the likelihood that your heirs will contest how your estate is handled.
Subtypes of Trusts
These two major categories of trusts can be further split into various categories depending on why you create the trust, the type of property you put into the trust, and how much power you want to give to your heirs in the trust. Common examples of subtypes of trusts include;
Generation skipping trusts, which allow you to pass property from yourself to your grandchildren.
Land trusts, which allow land to be managed by your family.
Medicaid planning trusts, which allow you to put your property into a trust to allow you to qualify for medicaid if you have too many assets.
Special needs trusts, if you have a family member with mental health needs or other disabilities.
Spendthrift trusts, which allow you to limit the amount of money your heirs receive over a period of time if you are afraid they will spend all the money too quickly.
Charitable trusts, which allow you to leave money to a charitable organization of your choice.
QTIP, which is a type of trust that allows you to leave tax-incentivized assets to your spouse.
Why you need an estate planning lawyer.
As you can see, trusts are a very complicated area of law which require a significant amount of thought. There are many different types of trusts in Virginia, and the one that is right for you depends largely on why you want to create the trust and what the trust is to be used for. A lawyer can help you navigate these various types of trusts to determine which is best for you.