Trusts are a commonly-used estate planning tool that can help you pass on your assets to your loved ones in a tax-efficient manner. There are many different types of trusts, each with its own set of benefits and drawbacks. Here are the four basic types of trusts in South Carolina.
1. Revocable trusts
A revocable trust, also known as a living trust, is a type of trust that can be modified or revoked by the grantor at any time. This flexibility makes revocable trusts a popular choice for estate planning in South Carolina. However, because the assets in a revocable trust are still considered part of your estate, they will be subject to estate taxes when you die.
2. Irrevocable trusts
An irrevocable trust is a type of trust that cannot be modified or revoked by the grantor. This lack of flexibility may seem like a disadvantage, but it actually has some significant benefits. Because the assets in an irrevocable trust are no longer considered part of your estate, they will not be subject to estate taxes when you die. This can save your loved ones a significant amount of money.
3. Testamentary trusts
A testamentary trust is created by a will and only goes into effect when the grantor dies. This type of trust is often used to provide for minor children or disabled adults, protect a spouse’s financial future by providing a lifetime income, and gift to charitable causes.
4. Special need trusts
A special needs trust is designed to provide for the care of someone with physical or mental disabilities. Special needs trusts can be either revocable or irrevocable, depending on the beneficiary’s needs. People create this trust to ensure their disabled kids don’t miss out on SSI benefits when they come of age.
When choosing a trust, there are many factors to consider, such as your age, health, assets, and family dynamics. A well-crafted trust will help avoid exorbitant probate costs, higher tax burdens for your beneficiaries, and family conflicts.
