A trust is a legal entity that holds assets for the benefit of another and can also hold various types of assets. There are many types of trusts, each designed for a specific purpose.
1. Trusts are often used to minimize estate taxes.
2. Trusts help you avoid both the expense and delay of probating a will and settling your estate. Probate* delays the transfer of your assets and incurs possible attorney and executor fees to be paid out of your estate, not to mention the time the executor of your estate must deal with the delays, court appearances, meetings with attorneys and other advisors.
3. Trusts can provide assets for your children until they are grown or mature.
4. A trust can support you in the event of incapacity.
*Probate is a court-supervised process that winds up your financial affairs after your death, taking place in the state where you were at the time of your death, and can take years.
Three Common Types of Trusts
As previously mentioned, there are many kinds of trusts. These trusts can be funded with equity portfolios, real estate, life insurance, other assets. Those most commonly used trusts may include one or all of the following:
• Revocable or living trust: avoids probate, maintains control, and protects against incapacity.
• Irrevocable trust cannot be easily changed (i.e., beneficiaries or terms) and is frequently used to help reduce potential estate taxes.
• Testamentary trust arises upon the death of the testator, and which is specified in his or her will. A will may contain more than one testamentary trust and may address all or any portion of the estate.
Consult with your estate planning attorney about if a trust is appropriate for you and the type of trust that makes the most sense for your situation. Then consult with your financial advisor for help with funding the trusts with the right assets.
Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
This information is being provided only as a general source of information and is not intended to be the primary basis for investment decisions. It should not be construed as advice designed to meet the particular needs of an individual investor. Please seek the advice of a financial advisor regarding your particular financial concern.
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