How to Choose the Right Type of Trust for Your Needs

When it comes to planning for your future, one of the most important decisions you may face is determining which type of trust is best suited for your individual needs.

At David W. Walker Attorney at Law, I’ve had the privilege of helping many clients make this decision in Columbia, Missouri, and surrounding areas, including Jefferson City, Fulton, and Boonville.

Trust law can be complicated and deeply personal, but selecting the right trust is critical to fulfilling your goals, whether those are to protect your assets, plan for estate distribution, or provide for loved ones in a meaningful way.

I’m here to help you understand the different types of trusts, walk through the process of selecting the right trust, and become familiar with Missouri law. You will gain a clearer understanding of your options so you can make an informed decision about which trust best suits your needs.

Trust Law and Its Purpose

At its core, trust law revolves around a legal arrangement where a person (the grantor) transfers assets to a trustee, who then manages those assets for the benefit of beneficiaries. Missouri law has a wide range of trust types, each designed to address specific needs.

Trusts can serve a variety of purposes, including:

• Estate planning

• Asset protection

• Charitable giving

Trusts are incredibly flexible, and understanding how each type of trust works under Missouri law is the first step in choosing the right one. Some trusts are revocable, meaning you can change them or dissolve them as needed, while others are irrevocable, meaning once the trust is established, it can’t be altered. 

The choice between revocable and irrevocable trusts will have a significant impact on how the trust operates and how assets are managed.

Revocable Trusts

One of the most commonly used types of trusts in Missouri is the revocable living trust. As the name suggests, a revocable trust allows you to retain control over the assets placed in the trust. You can modify the terms of the trust, change beneficiaries, or even dissolve the trust entirely if your circumstances change. 

From a trust law perspective, this type of trust offers significant flexibility and control, making it a popular choice for individuals who want to retain decision-making authority during their lifetime.

The primary benefit of a revocable trust is the ability to avoid probate, which is the court process used to distribute a person’s estate after they pass away. With a properly established revocable trust, assets can pass directly to the beneficiaries without the need for probate, saving time and money and avoiding potential legal complications. 

However, it’s important to note that because the trust is revocable, the assets placed in the trust are still considered part of your estate for purposes of estate taxes, and creditors can still make claims against the assets.

For those who want a degree of control over their assets while also avoiding probate, a revocable trust is often a great option. That said, it’s essential to consider your personal goals when making this decision, as the trust law implications for a revocable trust may not be suitable for everyone.

Irrevocable Trusts

Unlike a revocable trust, an irrevocable trust can’t be changed or revoked once created. This lack of flexibility can be a drawback for some, but it also provides significant benefits. 

Irrevocable trusts are often used for asset protection, as assets placed in the trust are no longer considered part of your estate. This protects your estate from creditors, lawsuits, and other claims.

From a trust law perspective, an irrevocable trust can offer estate tax benefits as well. Because assets are no longer part of your estate, they aren’t subject to estate taxes after death. For individuals with substantial assets, this can be an important factor in reducing the estate tax burden on their heirs. 

Irrevocable trusts are also commonly used for charitable giving, as they allow individuals to create charitable trusts that provide a lasting benefit to a cause they care about while also enjoying tax deductions during their lifetime.

While irrevocable trusts are advantageous in terms of asset protection and tax savings, they aren’t for everyone. 

Once you transfer assets into an irrevocable trust, you no longer control them, and the trust can’t be modified. For people who want the flexibility to change their estate plans in the future, an irrevocable trust may not be the right choice.

Special Needs Trusts

For individuals whose loved ones have special needs, a special needs trust can be an essential estate planning tool. This type of trust is designed to provide financial support to someone with a disability while maintaining their eligibility for government assistance programs, such as Medicaid or Supplemental Security Income (SSI). 

Under Missouri trust law, special needs trusts are carefully structured to confirm that the assets in the trust aren’t counted as income or resources for these programs, allowing the beneficiary to continue receiving the benefits they’re entitled to.

A special needs trust can be either revocable or irrevocable, depending on the goals of the grantor. If you want to retain control over the assets during your lifetime, a revocable special needs trust may be appropriate. 

However, if you’re looking to provide long-term support for a loved one without affecting their government benefits, an irrevocable special needs trust may be the best option.

When establishing a special needs trust, it’s important to work with a professional who understands trust law and government assistance programs. Their guidance enables the trust to be structured correctly, maximizing its benefits and fulfilling its intended purpose.

Testamentary Trusts

A testamentary trust is created through a will and only comes into effect after the death of the grantor. While this type of trust isn’t commonly used during a person’s lifetime, it plays an important role in planning for the distribution of assets upon death. Testamentary trusts can be used to provide for children, grandchildren, or other family members in a structured way, allowing the grantor to dictate how and when the assets are distributed.

From a trust law perspective, testamentary trusts are particularly useful to set aside funds for beneficiaries who may not be able to manage the assets themselves, such as minors or individuals with financial difficulties. 

This type of trust can specify how assets will be distributed over time, such as in installments or upon reaching a certain age.

Because testamentary trusts are created through a will, they’re subject to probate. While this doesn’t avoid the probate process, it can provide more control over the distribution of assets than a simple will alone.

Choosing the Right Trust for Your Needs

Selecting a suitable trust involves considering a variety of factors, including:

• Your goals

• The size of your estate

• The needs of your beneficiaries

Trust law in Missouri offers several options, each with distinct advantages and disadvantages. When deciding which trust is right for you, it’s important to think about how you want your assets to be managed, whether you want to avoid probate, and whether you have concerns about asset protection, estate taxes, or providing for a loved one with special needs.

As a lawyer, I always encourage my clients to have a detailed conversation about their goals and concerns. Trust law can be a powerful tool, but the right type of trust for one person may not be the best for another. 

For some, a revocable living trust may provide the right balance of control and protection. For others, an irrevocable trust or special needs trust may be more appropriate.

Contact an Experienced Estate Planning Attorney

At David W. Walker Attorney at Law, I understand that trust law can be overwhelming, but the right trust can provide immense peace of mind. I’m proud to serve Columbia, Missouri, and the surrounding areas of Jefferson City, Fulton, and Boonville. Call today to learn more about my firm’s estate planning services.