The way that the trust administration process plays out depends on the specific stipulations in that trust, the goals of the original creator of the document and what type of trust it is. Everyone who sets up a trust should have considered all of their options to determine exactly what fits best with their family, their needs and their plans for the future.
Some common types of trusts include:
- Totten trust, which is a revocable trust
- Tax by-pass trust
- Spendthrift trust
- Special needs trust
- Constructive trust, which is an implied trust
- Charitable trust
- Asset protection trust
Even when two trusts are technically the same, the way they function can be very different depending on the specific details of the trust.
For instance, a spendthrift trust is typically used to protect an heir from their own spending habits, perhaps by paying out the money in installments every year or only when they reach a certain age. The amounts can differ extensively from one trust to another, as can the age requirements.
Some people want to make sure that the beneficiary of the trust does not get the money before a specific age — say 25 years old — and then everything pays out at once. Others set up payouts every five years to spread the money out even more. There is a lot of flexibility for designing the plan to the heir’s specific needs.
It is important for the trustee and the heirs to completely understand the stipulations as the trust gets administered for years to come, as well as understanding what rights and obligations they have.