As you create your Ohio estate plan, you likely find yourself discovering more about trusts than you possibly ever wanted to know. But while the variety of trusts available for you to choose from may seem overwhelming at first, you should keep in mind that all trusts are one of two types: revocable and irrevocable. Which type you choose depends on what you want to accomplish and how you want to accomplish it.
The most obvious difference between a revocable trust and an irrevocable one is just what their names imply. After you execute a revocable trust, you can change any of its terms, provisions, etc. any time in the future that you desire. You can even revoke it. Conversely, once you execute an irrevocable trust, you lose a lot of control over the assets you place in it and what you can do with them. In other words, you are writing your irrevocable trusts in stone. Once you execute them, you cannot later change them or their provisions in any way.
Basic trust attributes
Whether revocable or irrevocable, all your trusts contain the following three components:
- The name(s) of the trust’s beneficiary or beneficiaries
- The name(s) of the trustee(s) who you designate to oversee and manage the trust and distribute its assets and/or the income therefrom to your designated beneficiary or beneficiaries
- The assets that you transfer into the trust
Since you cannot later change or revise an irrevocable trust if you change your mind about any of its designations or provisions, you should be extra careful when setting one up. Make sure that, to the greatest extent possible, you include exactly what you want in this type of trust, and will continue to want in the future.
When you place assets into a trust, you no longer own those assets yourself. The trust does. Nevertheless, whichever type of trust you choose to establish, you can still maintain control over its assets by carefully crafting the trust’s language.
For instance, if you designate yourself as the trustee, you can continue to control how the trust assets and the income they produce get distributed to the beneficiaries. If you designate yourself as the beneficiary, or one of them, you yourself can receive the trust income, as well as the trust assets themselves, whenever and however you designate in the trust.
Whatever it is that you wish to accomplish, a trust likely exists that will allow you to do it. Remember, your overall estate plan can contain as many trusts as you desire. You may therefore wish to consider some of the following:
- One or more special needs trusts that benefit your disabled child or some other family member
- One or more generation-skipping trusts that benefit your grandchildren without necessarily disinheriting your children
- One or more charitable trusts that benefit, for example, your church, your favorite charity, your alma mater, etc.
- One or more asset protection trusts that keep your assets out of the hands of your creditors should you encounter financial difficulties
Bottom line, carefully and wisely using trusts in your overall estate plan can give you very real peace of mind. You can rest assured that they and the way you set them up protect you, your family, and your assets now and in the future.