Tacoma residents who are creating an estate plan might wonder whether they should use a trust and if so, what kind. A living trust is one of the most flexible because it leaves the grantor in control of the assets. The person can move assets in or out of the trust, change beneficiaries or even cancel the trust.
People who have a loved one with special needs who gets benefits from the government can set up a special needs trust. This type of trust can help support the person without endangering the person's access to the government benefits. Another type of trust is an incentive trust. This puts certain requirements on the beneficiaries. For example, the beneficiary might be required to complete a college education before getting distributions. With a charitable trust, distributions can be made to charity and to the trust owner or other beneficiaries.
In the past, many couples used a trust to protect themselves from estate tax. However, with the individual estate tax exemption at more than $11 million, this is necessary for far fewer people. People who inherit or who are gifted significant assets may want to place those assets in a trust to protect them.
An attorney may be able to explain how a trust can function as part of estate planning and the advantages and disadvantages of various types of trusts given a person's individual situation. For example, an irrevocable trust may protect assets from creditors in case of a divorce, but unlike a living trust, it takes the assets out of the creator's control. A possible drawback of an incentive trust is its rigidity. While it is understandable that a person might want to protect assets from a young or irresponsible beneficiary, it may be a mistake to try to exert too much control.