A Guide To Special Purpose Trusts

When you are looking to build your estate plan, one of the best tools you can use when creating an estate plan is a trust. There are many different types of trusts that can serve your unique needs, depending on your goals! 

At Z Family Law, our family and estate planning lawyers know that you want to be armed with options that are going to benefit your family even after you are gone. We have years of experience helping people create purpose-driven, customized estate plans. In this blog, we’ll tell you everything you need to know about special purpose trusts - which are lesser known than your typical living trusts - so you can know all of your options when it comes to selecting the right tool for you! 

Disclaimer: This article is current as of November 2024, and all content is provided for informational purposes only. None of the information provided in this article, or elsewhere on this website, shall constitute or be construed as legal advice. For information specific to your circumstances, call us at (301) 781-7930 today.

What Is A Trust And Why Do I Need One?

A trust is an estate planning tool that protects assets and transfers them to people you want to inherit or benefit from them. For example, with most types of trusts, you place assets or a certain amount of money in the trust, which is then transferred to your beneficiary upon your death or a certain life event. 

The amount of money and time it will take for your assets to be transferred to your beneficiary depends on the type of trust you have and the terms you have set for it. For example, a small amount of money might be dispensed to your beneficiary every month, or they might get access to the full amount after they complete some milestone such as graduating college or getting married. As you can see, trusts can be highly versatile!

Trusts are also useful tools because they create a direct pipeline between you and your beneficiary. Many people design trusts to distribute their assets after they pass because the contents of a trust are not subject to probate, meaning that beneficiaries are able to access their inheritance without the interference of the court.

The most common types of trusts are revocable and irrevocable trusts, but there are many other types that have special purposes. Here are a few and what they do!

Charitable Trusts

If you want to leave a portion of your assets to your favorite charity, you can choose one from a number of charitable trusts, which are designed to help you accomplish your charitable goals. These trusts come in two main forms: as a charitable lead trust or a charitable remainder trust. 

Charitable lead trusts provide income to charities during a certain term and, once the term has ended, the remaining assets are distributed to named beneficiaries. Charitable remainder trusts, on the other hand, provide income to you or your beneficiary over the term of the trust, and the remaining assets are distributed to your charity once this term is up. 

The type of charitable trust that is best for you will be determined by factors such as your specific estate planning goals, the type of charity to which you are giving, what timeline works best for you, and the type of charitable gift you anticipate giving. 

Spendthrift Trusts

Do you have a loved one who is bad with money? If you want to leave assets to a loved one who might be financially irresponsible or who has a chance of spending all of their inheritance in one place, you could use a spendthrift trust. They are also ideal for people who are heavily in debt, who are suffering from an addiction, or who have developmental disabilities that make it hard for them to manage money.

Spendthrift trusts distribute the assets of the trust on a specified timeline; they don’t distribute all of the assets at once. Rather, beneficiaries receive a designated amount at designated times and, if you want to, you can ensure that certain guidelines are enforced before they receive a payout. 

Special Needs Trusts

If one of your loved ones has a disability or chronic illness, and they will need medical assistance for the rest of their life, you can help them by establishing a trust that incrementally dispenses money every month to help them afford their housing and medical needs, such as medications, mobility aids, surgeries, and physical therapy sessions. 

One of the essential perks of a special needs trust is that it gives your loved one the money that they need without disqualifying them from their necessary state-sponsored healthcare benefits, which only allow a recipient to remain in possession of a small amount of assets at a time. Trust funding (when done correctly) is not counted toward these thresholds, so your loved one can access additional support without jeopardizing themselves!

Pet Trusts

Have a pet you love? Do you want to ensure that they are cared for should something happen to you? A pet trust allows you to designate a caretaker for your pet should you pass away or no longer have the ability to care for them. The assets from the pet trust go to the caretaker so they can afford the needs of your furry, feathery, or scaly loved one.

In addition to a caregiver, you also appoint a trustee for this type of trust to ensure that the funds from the trust are being used for the care of your pet. Your pet will be cared for according to your instructions, which include aspects such as feeding, grooming, medicine, and so on.

Z Family Law Can Set Up The Trusts You Need

Looking to create an estate plan or cap off an existing one by establishing appropriate trusts? The estate planning lawyers of Z Family Law can help you determine the trusts that are best for you and your needs, in addition to all other aspects of your estate plan. Reach out to schedule a free initial case evaluation!