What is a Trust?
A trust is a fiduciary arrangement that allows you, the owner of the assets (trustor), to designate a third party (trustee), to hold assets on behalf of a beneficiary or beneficiaries of your choosing. Trusts can be used as a powerful tool to protect and distribute your assets as part of an estate plan.
Continue reading on this page to learn more about the common types of trusts that can be used for a variety of estate planning objectives. Our team of experienced estate planning attorneys are dedicated to helping you fully understand how a trust can benefit you and your loved ones.
Categories of Trust
While there are many types of trusts available, they all fall into two specific categories:
Category 1: Living Trust or Testamentary Trust
Living Trust: A living trust, also referred to as an inter-vivos trust, is a legal document in which your assets are provided to a trust for use during your lifetime. Following your death, the assets are transferred to your designated beneficiaries by a successor trustee.
Testamentary Trust: A testamentary trust is also referred to as a will trust due to its similarities to a traditional will. The trust specifies how your assets are distributed after your death.
Category 2: Revocable Trust or Irrevocable Trust
Revocable Trust: A revocable trust can help assets pass out of probate, while allowing you to retain control of the assets during your lifetime. A major benefit of a revocable trust is your flexibility to dissolve the trust at any time should your wishes or situation change prior to your death.
While a revocable trust can help your heirs avoid probate, they will likely still be subject to estate taxes. During your lifetime, the assets placed in the trust are still treated the same as any other asset you own.
Irrevocable Trust: An irrevocable trust transfers the assets out of your estate and out of your control. A well-constructed irrevocable trust can provide the best protection from estate taxes and probate. As the name suggests, once an irrevocable trust has been executed, you cannot alter the trust should your wishes or life events change.
Irrevocable trusts also provide benefit by relieving the tax liability from any income generated from the assets. However, the distribution of the assets will typically have income tax consequences.
“Dan made my experience of creating a trust very easy. I was not clear on so many things but he was very patient and understanding. He answered all my questions and made sure I was happy with how the Trust was created before signing. Abrate & Olsen easily earned a 5-star rating from me. Thanks again!”
~ Salena P. – Lafayette, CA
Types of common trusts available to you
There are many common types of trusts that can be constructed as part of your estate plan to help achieve your goals. Some of the most common types of trusts we recommend to our clients are:
A marital trust, also referred to as an A trust or QTIP trust, is used to provide benefits to a surviving spouse. The trust is generally included in the surviving spouse’s taxable estate.
An exemption trust, also referred to as a B trust, bypass trust, or credit shelter trust, is created to bypass the surviving spouse’s estate. With this the trust takes advantage and full use of any federal estate tax exemptions for both spouses.
There are two common charitable trusts, a charitable lead trust and a charitable remainder trust. A charitable lead trust provides that specific benefits be distributed to a charity and the remainder going to your designated beneficiaries. A charitable remainder trust provides you with a stream of income from the trust for a specified period with the remainder of the assets going to a charity.
Special Needs Trust
A special needs trust allows you to provide for a loved one with special needs or a disability who receives government benefits, such as Social Security disabilities benefits. The special needs trust allows the disabled beneficiary to receive income from the trust without affecting or requiring them to forfeit the government benefits.
A blind trust allows the designated trustees to manage the assets in the trust without the beneficiary’s knowledge. This trust agreement can be helpful when a beneficiary needs to avoid conflicts of interest.
Experienced Legal Professionals
Scheduling a consultation with one of our estate planning attorneys is the best way to understand what trust will provide the best solution for you. Our Estate Planning Attorneys are here to assist you and your loved ones through the process of creating a Trust. To get started, contact our office today for a consultation.