In Minnesota, You’ll Find Different Trust Types—Each With its Own Advantages
When it comes to trusts, there’s no such thing as one-size-fits-all. Minnesota law allows for many different types of trusts, and different trust types can be used in different situations.
Seeking the guidance of an experienced lawyer is crucial when considering establishing a trust. A skilled attorney will work closely with you to understand your specific needs, financial situation, and objectives. Based on their assessment, they can provide personalized recommendations on the most appropriate type of trust for your unique circumstances.
An experienced lawyer can listen to your needs and recommend which trust may be right for you. Here’s an overview to help you get started.
Testamentary Trusts
Testamentary trusts are established through a will and take effect after a person passes away, distributing assets to beneficiaries. There are many benefits to creating a testamentary trust.
One common benefit is to protect assets that would otherwise transfer to someone who is too young to use them responsibly. If a child is a beneficiary to a will, the testamentary trust can hold the assets until they’re older. The trust can also hold the assets for specific purposes—like paying for college, a wedding or a first home.
Living Trusts
Also called an “inter vivos trust,” a living trust is created during a person’s lifetime. Some or all of the person’s property is transferred into the trust. The most popular type of living trust is called a “revocable living trust.” This type of trust allows for changes to the trust during a person’s lifetime.
Revocable living trusts offer some advantages. Primarily, these trusts enable you to have a trustee with financial expertise manage your assets during your lifetime. This person can make sense of your financial affairs. They may invest your assets, pay your bills, and file your taxes for you.
There are other benefits as well. Revocable living trusts can protect your privacy by keeping assets within the trust out of official probate records during distribution of assets. The trust beneficiaries will know what’s in the trust, but the information will not be readily available to others through court records.
Revocable living trusts also help prevent delays during the probate process. Trust assets can usually be distributed to beneficiaries quickly without having to go through the probate process.
Trusts for Specific Uses
Other types of trusts can be tailored to fit your goals and may be an excellent solution for you in certain situations. Here are some examples of specific-use trusts:
- Charitable trusts: These trusts can be used to make donations to charities close to your heart. Property is placed in the trust, which is then transferred to a charity after your death with minimal tax consequences.
- Bypass trusts: These trusts help married couples shelter portions of their estate from taxes. When the first spouse passes away, their assets go into the trust and provide income to the surviving spouse. When the second spouse passes away, the assets in the trust are passed to the beneficiaries without being taxed.
- Spendthrift trusts: These trusts are used when a person is too young or has an impairment that prevents them from managing their finances responsibly. The trust can be set up so the beneficiary receives their money in small portions. This prevents them from wasting the money or losing it on bad investments.
Get The Minnesota Legal Help You Need
The choice of trust type depends on various factors, including your financial goals, family situation, and tax implications. Consulting with a qualified estate planning attorney is essential to determine the most suitable trust for your specific needs and to ensure that it is properly established and administered.
Talk with the attorneys at White & Associates about which trust type is right for you. Contact our Elk River, Minnesota, law offices at 763-241-0477.
