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One of my biggest goals in 2024 was to finally get a will and an estate plan. I failed to do either of those things. When I attempted to take action, I got too overwhelmed and pushed those items further down my to-do list. But I’ve decided to finalize my estate plan before the end of the first quarter of 2025.
In addition to making a will, I also need to decide what types of trusts I want to have to protect my finances and my two-year-old daughter, who would be the beneficiary of my assets if anything were to happen to me. To help me understand this more, I spoke with Donna Stefans, an elder law and estate planning attorney. Here are the types of trusts she recommended I consider.
The author, Jen Glantz. Gaby Deimeke
1. A revocable living trust
The first trust that Stefans suggested I get is a revocable trust, a layer of instructions that go on top of your assets to define who is in control of them during your lifetime and when you pass away, quickly and easily, with no court intervention.
“A revocable trust sets the stage for how your assets should operate and accounts for different scenarios you and your beneficiaries might encounter,” Stefans said. “For example, what if somebody becomes disabled or what if somebody passes away and their beneficiaries are all children?”
Stefans said that a revocable trust is even more important than a will.
“It should be your No. 1 ruling document,” she explained. “When you have a will, your beneficiaries have to take it to court, and it could take years before they are able to access your assets. A revocable trust allows them to skip that process and immediately have your assets pass to your beneficiaries exactly how you intend, with ease and without high court time and expense.”
2. An IRA trust
I mentioned that I have a retirement account that I wanted to include in my estate planning. Stefans said that I should consider getting an IRA trust, which would allow my daughter to be the beneficiary of my retirement account.
“When a person passes away, their IRA money would go into this trust, with a designated trustee, who would manage the money until the beneficiary becomes of age to manage the trust and the IRA, responsibly as an adult would, if you were still here.” she said.
Without an IRA trust, if a person dies and leaves their IRA to a minor, the family has to go to court to obtain a court-appointed guardian to manage the account until they reach the age of maturity. That process could take years.
“By doing an IRA trust, you are already stating who the trustee would be and what age your daughter would get the money, without having any courts ever be involved,” she explained.
Another big benefit of an IRA trust is that if my daughter leaves the money in the trust, it becomes a protected asset for her future.
“If down the line she gets married, divorced, or files for bankruptcy, nobody can touch the assets in this trust,” Stefans said.
3. A trust for minors
Since I’m doing my estate planning now, and I have a daughter who is two-years-old, Stefans recommended I get a trust for minors. This type of trust allows me to leave assets to my child that are managed by a different trustee until she reaches a certain age, that I’m able to select.
“If you leave $500,000 to your daughter, under the guise of a trustee, until she reaches 25, that trustee is able to manage the money, spend it on their behalf, until she hits that age,” Stefans said.
With a trust for minors, you can select when to release the funds, who will be the trustee, rules on how the money can be used, and whether the minor can receive income when the trust is active.
4. An education trust
Similar to a trust for minors, an education trust outlines how money in that trust will be used for the beneficiary.
“You can outline how you’d like the money to be spent, first for their education, and then if there’s any money left, you can state the age that you’d like them to have access to it,” said Stefans. “Think of this trust as a way to plan for your kid’s success when you are gone.”