A Hybrid Trust is a type of trust that combines features of both revocable and irrevocable trusts, allowing for flexibility in estate planning while also offering some benefits typically associated with irrevocable trusts.
In a Hybrid Trust, the grantor retains certain powers typically associated with revocable trusts, such as the ability to modify or revoke the trust during their lifetime. This provides the grantor with control over the assets and the distributions made from the trust, ensuring that they can adapt the trust to changing circumstances or preferences.
At the same time, a Hybrid Trust may also incorporate characteristics of an irrevocable trust, such as providing asset protection from creditors or potential estate tax benefits. Once assets are transferred to a Hybrid Trust, they may be shielded from the grantor’s creditors or may not be included in the grantor’s taxable estate, depending on how the trust is structured.
For example, a Hybrid Trust might allow the grantor to receive income generated from the trust assets while still ensuring that the principal is protected from estate taxes upon their death. This type of trust can be particularly useful for individuals seeking to balance control over their assets with the benefits of asset protection and tax advantages.
In Texas, where estate planning laws can vary, it is essential to consult with an attorney to ensure that a Hybrid Trust meets specific state requirements and achieves the desired objectives for asset management and protection.
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