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Different Types of Legal Trusts

Depending on what situation you or a loved one may be in, you may want to consider starting a trust. There are many different kinds of trusts, and each aids a person with varying needs and circumstances. Here are a few of the common different types of legal trusts.

Special Needs Trust

A special needs trust is typically set up for a person with special needs who receives government assistance or benefits. The trust holds the person’s assets without disqualifying them from any government benefits they receive, as the income requirement for this assistance is quite low. A family member of the trust beneficiary commonly establishes this type of trust to protect their loved one from benefit disqualification when they plan to come into any money, such as in a will, legal settlement, or other reason. There are a lot of decisions to make when one is establishing a special needs trust, as every situation differs and needs vary based on the individual.

Tax Bypass Trust

Married couples typically establish tax bypass trusts to financially protect each other and their children in the event of one spouse’s death. This type of trust allows them to pass worldly possessions, property, and money down in a will without the burden of full taxation from federal estate taxes, which would typically be due when one spouse dies. Tax bypass trusts prevent the remaining spouse or the children of the couple from having to pay taxes at a rate as high as 55 percent on any assets passed down to them.

Asset Protection Trust

An asset protection trust is designed to protect assets from creditors. These are most commonly set up in foreign countries, and they’re meant to protect the person who set up the trust from creditor attack. People in high-risk professions, such as doctors, surgeons, or real estate developers, most commonly establish these types of trusts. They’re also common among extremely wealthy people, who are typical targets of creditors.

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