Accounting Articles > Trusts:
What kind of trust is best for me or my situation?
Which type will be best for your situation depends on the asset, or group of assets, going into the trust, the original purpose of the trust, and the amount of control necessary, given the abilities of the trustee.
There are over fifteen different types of trusts, which are very generally divided into two categories: simple trusts and complex trusts.
A simple trust requires current distributions of all of its income, cannot distribute its principal, and cannot make charitable contributions. A complex trust is any trust other than a simple trust.
Trusts can also be divided into two different categories, namely those trusts that can be changed and those that cannot.
For example:
You have three children and $2.4 million to give away. You want to divide it among them equally, $800,000 apiece. One of your children has a drug problem, and has stolen from you before. You know that the second this child gets $800,000, it will go right up their nose, so you put it into an irrevocable trust. This is one that, theoretically, cannot be changed. You, therefore, are reasonably assured that the asset will not be misused.
I could spend the next year talking about trusts. Depending on your circumstance, there is probably a reasonable solution. Speak to an informed counselor today.
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