Different Types of Trusts in Washington State
Depending on the size and nature of one’s estate, and one’s plans and goals for the future, estate planning can be a complicated task with lots of moving parts. In almost every situation, no matter how simple or complex the estate is, trusts play a crucial role in the estate plan, offering a range of benefits from asset protection to tax advantages to meeting special needs. Continue reading for a description of the different types of trusts that are most commonly used by individuals and families as they plan their futures. For advice and assistance tailored to your particular situation, call John Lutgens, Attorney at Law, to speak with an experienced and knowledgeable Vancouver estate planning lawyer.
What Is a Trust?
A trust is a legal arrangement where one party, known as the trustee, holds and manages assets on behalf of another party, the beneficiary. Trusts are established to provide legal protection for the trustor’s assets, to ensure those assets are distributed according to the trustor’s wishes, and to save time, reduce paperwork, and, in some cases, avoid or reduce inheritance or estate taxes.
Key Types of Trusts
1. Revocable Living Trusts
A revocable living trust is a popular choice for many in Washington. It allows the trustor to retain control over assets during their lifetime and modify the trust as needed. Upon the trustor’s death, the assets are transferred to the beneficiaries without the need for probate, which can save time and money.
2. Irrevocable Trusts
In contrast, an irrevocable trust cannot be easily changed or revoked once it is established. This type of trust can be useful for asset protection and tax benefits, as the assets in the trust are no longer considered part of the trustor’s estate for attachment by creditors or tax purposes.
3. Testamentary Trusts
Testamentary trusts are created as part of a will. They only come into effect after the death of the trustor. These types of trusts allow for greater control over the distribution of assets, particularly for beneficiaries who might not be ready or able to manage a large inheritance.
4. Charitable Trusts
Charitable trusts are set up to benefit a particular charity or the public in general. There are two main types: Charitable Remainder Trusts, where the trustor or other named individuals receive income for a period before the remainder passes to the charity, and Charitable Lead Trusts, where the charity gets the income first, followed by the remainder going to the beneficiaries.
5. Special Needs Trusts
Designed specifically for beneficiaries with disabilities, a special needs trust ensures that the beneficiary can still receive inheritance without losing eligibility for government assistance programs like Medicaid or Supplemental Security Income.
6. Spendthrift Trusts
This trust type protects a beneficiary from creditors or their own poor financial decisions. It allows the trustee to have strict control over the distribution of assets, providing regular income or payments instead of a lump sum.
Choosing the Right Trust for Your Estate Planning Needs
Selecting the right trust depends on numerous factors, including your financial situation, your goals, and the needs of your beneficiaries. An experienced estate planning attorney can provide valuable insights and tailored advice to ensure that your estate plan aligns with your objectives and provides the best possible protection and benefits for you and your loved ones.
Contact Vancouver Attorney John Lutgens for Help With Trusts in Washington State
Trusts are a versatile and powerful tool in estate planning, offering various options to suit different needs and goals. Whether you seek to protect your assets, avoid probate, or provide for a loved one with special needs, understanding the different types of trusts is a crucial step toward creating a comprehensive and effective estate plan. With the expertise of a seasoned estate planning attorney like John Lutgens, residents of Vancouver, Washington, can navigate these choices with confidence and peace of mind.
For personalized guidance on establishing a trust as part of your estate plan, call attorney John Lutgens at 360-693-2119 for a free initial consultation.