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What are the different kinds of trusts available?

Trusts can be an effective alternative to a will when planning your estate. They can help you leave specific instructions for some people or even pets.

However, the sheer number of trusts available can be intimidating. The flexibility of a trust is one of its greatest assets but it can also make it difficult to find the best fit.

In Arkansas, the most common type of trust is what’s known as a living trust—a trust that is created while you’re alive. These can be either revocable or irrevocable.

Flexibility comes with revocable trusts. They allow you to maintain control of the assets in them and revoke or change the terms of the trust at any time.

Irrevocable trusts are more concrete. Once you create an irrevocable trust, the assets inside are no longer available to you. Usually you cannot make any changes to an irrevocable trust without the beneficiary’s permission.

In an irrevocable trust, any assets that gain value while in the trust don’t qualify for estate taxes. Any assets you expect to appreciate are good candidates for an irrevocable trust.

While these are the two most common types of trust, there are others:

A generation-skipping trust lets you pass on an inheritance to grandchildren while excluding children (thus skipping a generation).

There’s also a qualified terminable interest property trust, which lets you bestow assets to certain family members. These trusts are useful for families experiencing divorce, remarriages, stepchildren and mixed families.

With a qualified trust, your spouse receives a lifetime income while the chosen beneficiaries eventually inherit your assets.

Trusts can be extremely helpful, but too many people don’t understand their purpose. When used correctly, a trust is an important part of a comprehensive estate plan.

If you haven’t created an estate plan, an experienced estate attorney can help you understand the options available.

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