Protecting a legacy is an important consideration for many people during the estate planning process, and there are several ways to approach this goal. You’ve probably heard of revocable vs. irrevocable trusts, but you might not be aware of the benefits of setting up a discretionary trust for your loved ones. Here are the basics you need to know before consulting with a Queens probate lawyer to set up a trust that works for you.
What’s the difference between a discretionary trust and other types of trust?
A discretionary trust gives the trustee the power to decide how, when, and if the beneficiaries may access the assets contained in the trust. For instance, some uses of the money might be deemed acceptable, while other uses would not be permitted.
There are many situations that call for discretionary trusts. For example, the person who created the trust might wish to distribute funds to pay for their son’s college tuition, or to help their daughter start a new business. However, if the beneficiary has debts or an impending divorce, the trustee can stop making distributions as outlined in the terms of the trust. The trustee can also make payments on the beneficiary’s behalf if the beneficiary is unable to manage money due to mental health, gambling, or substance abuse problems. This allows the trustee to make sure a loved one is taken care of without allowing the funds to be mismanaged.
The main categories of trust are revocable and irrevocable. In a revocable trust arrangement, or living trust, the person who creates the trust retains the right to rescind the trust and regain control of the assets named in the trust documentation. Conversely, an irrevocable trust cannot be revoked after its creation.
Once you decide whether the trust should be revocable or irrevocable, the next choice to make is fixed or discretionary. All assets in a fixed trust will be distributed at certain predetermined times or in particular amounts. The terms of a fixed trust are specified in the trust documentation. On the other hand, when legal documentation states that the trustee should determine at their sole discretion how much money to distribute, then the trust is called a discretionary trust. A Queens probate lawyer can provide guidance when it comes to choosing the right type of trust.
How does a discretionary trust protect assets?
As outlined above, a discretionary trust can help protect an inheritance by creating a legal barrier around the funds placed in trust. Whether they’re facing a contentious divorce, determined creditors, or are involved in a lawsuit, your beneficiary will have a very difficult time breaking through that wall and accessing property you’ve left. Although nothing is set in stone, a discretionary trust can make unauthorized access very challenging. Oftentimes, minor creditors will be discouraged by the difficulty in reaching funds held in trust and settle for a lower amount than they initially asked for.
Trusts are a complex element of estate planning, but they can be an important tool for families to protect their assets against uncertainty. For help deciding which trust is best for you, contact Queens probate lawyer Richard Cary Spivack, and get the expertise you need.