A trust is a legal entity that holds and manages property. In estate planning, it can be a valuable tool. A trust can organize asset management, protect assets from creditors and simplify distribution upon death.
There are multiple kinds of trusts. The type of trust that’s right for you depends on your individual situation. Our estate planning lawyers will explain the types of trusts in estate planning.
Revocable Trust / Revocable Living Trust
A revocable family trust offers the benefits of a trust when it comes to avoiding probate while still allowing individual control over the assets of the trust. The trust creator can name themselves as a trustee. As a trustee, they control the trust during their lifetime while they have capacity. They may receive income generated from the trust and access principal as needed. A successor trustee must be designated in the trust agreement.
For many people, the primary appeal of a revocable trust is that the creator can modify or revoke the trust as they see fit. It is not necessarily permanent. South Carolina Code § 62-7-103(13) provides that a settlor may revoke the trust without the consent of the trustee or a person who holds an adverse interest.
Once the trust is created, it must be funded. Creating the trust alone is not enough – the assets must be moved to the trust to avoid probate. Real estate is transferred to the trust using a deed. A pour over will will likely be appropriate, although it is important to periodically review the trust to make sure the appropriate assets have been added. A revocable trust stays private and allows for the quick transfer of assets.
An irrevocable trust protects the assets in the trust. However, unlike a revocable trust, an irrevocable trust cannot be canceled or ended by the settlor (“creator”). Because the creator of the trust no longer owns the assets, it is not available to creditors to satisfy debts or a judgment against the creator.
The most important thing to know about an irrevocable trust is that once it is created, it cannot be changed. The settlor cannot change their mind even if circumstances change.
Like a revocable trust, an irrevocable trust allows beneficiaries to avoid probate.
An irrevocable trust offers several benefits. It may allow parties to minimize estate taxes and create a set income stream. A charitable trust can allow creators to receive income now while leaving funds to charity when they pass away. There are rules for who may be the trustee.
Special Needs Trust
A special needs trust is a way to provide for the needs of a person who may need special assistance or receive benefits. When the assets are held in the trust instead of given to the individual, the individual may remain eligible for certain public assistance programs. Some public assistance programs have strict financial income requirements. If the person has too many assets, they cannot qualify for programs that they need.
With a special needs trust, assets can be protected without interfering with the person’s eligibility to participate in these programs. A third party who funds the trust, like a parent or grandparent, may create the trust to be effective immediately or upon their death. The trust can be set up so that other family members receive remaining assets if the beneficiary passes away.
Understanding What Type of Trust is Right for You
South Carolina allows people to create several different types of trusts. The right type of trust depends on the circumstances as well as the wishes of the party creating it. Within each type, there are different ways to structure and manage the trust. There are varying levels of control that are involved. Benefits to the creator and their heirs may also vary based on the type of trust.
Our estate planning lawyers create individual trust plans depending on the specific wishes and circumstances of each person and family. Let us learn about your case and how a trust may help you meet your goals, ease the burden of probate and provide for the future. Contact us today for your free case consultation.