If you have a trust involved with your estate plan, it is likely that you have utilized a revocable trust. When you create a revocable trust when you are alive, it is called a “living trust.” This type of trust is a tremendous tool that can help protect your estate (and the assets contained within) from the probate process.
What a revocable trust will not do is protect your assets from creditors. In order to protect the assets from creditors, you need to utilize an asset protection trust. Usually these trusts are established outside of the United States, and they protect your assets from claims made by creditors. These trusts are usually irrevocable in nature — meaning they can’t be changed or altered — for at least a certain number of years, if not permanently irrevocable.
There are many other types of trusts as well. Charitable trusts not only help you to avoid taxes on your assets, but these trusts donate your assets to charities of your choosing. There are constructive or “implied” trusts, which are created by a court when evidence proves that though no trust existed, the grantor clearly had the intent to create an estate. And there are special needs trusts, which can help people who are receiving government benefits but don’t want to be disqualified from getting those benefits as a result of inheriting something through an estate.
Even these trusts don’t cover all of the potential options that a grantor has. So if you are considering using trusts in your estate plan, know your options.