Trusts may seem like the inevitable choice for people in Minnesota who are considering their estate planning alternatives. In fact, a trust is a tool that has many advantages and disadvantages, and the key to making this option beneficial is finding the type that best suits the circumstances.
Findlaw notes that a trust is revocable when the trustmaker remains in control of the funds during his or her lifetime. It is irrevocable if the assets are not accessible after they are transferred to the trust. Further, some trusts are set up to assist beneficiaries in specific situations. For example, a person who has disabilities can only receive government benefits if his or her income is below a certain level. If the assets are in a special needs trust, a monthly allotment may be made that allows the disabled person to qualify for the help he or she needs.
A person who is concerned that creditors may make claims to funds may be able to prevent this through a trust. Creditors cannot access anything in an asset protection trust. This type is irrevocable, but has a time limit on it. At the end of the specified period, the trust ends and the trustmaker regains control over the assets. A spendthrift trust prevents a beneficiary from selling his or her interest in the trust as well as keeping access of the funds out of the hands of creditors.
CNN Money explains that trusts can be funded by a life insurance policy if a person chooses to make the trust the beneficiary of the insurance money. The funds would then be administered for heirs by the trustee. If a trustmaker does not want to make his or her immediate heirs the beneficiaries of the trust, it is possible to create a generation-skipping trust, or a qualified terminable interest property trust. Other types of trusts are designed specifically to avoid estate and gift taxes, and to bypass probate.