Learn about the Different Types of Trusts | Trust Options
If your loved one decides to create an estate plan utilizing a trust, you may be appointed a successor or co-trustee of the trust. It is important to understand your duties and responsibilities as a trustee. In addition as a trustee, you also want to know what type of trust you may be working with. There are many different types of trusts, each with its own characteristics. Keep on reading to learn more about the different types of trusts.
Eight Common Types of Trusts You May Be in Charge of Administering:
What are some of the more common types of trusts you may encounter? The following is an overview:
An important characteristic that sets testamentary trusts apart from other trusts is that they are set up through your loved one’s will, and are only established after he or she passes away. Your duties as a trustee will therefore not arise until after your loved one has passed, versus a living trust, where your duties could be triggered even while your loved one is still alive.
Revocable or Living Trusts
Perhaps the most common type of trust, these trusts are created and established during your loved one’s lifetime. During your loved one’s lifetime, he or she retains control of all of the assets of the trust and is free to revoke or change its terms at any time. Your duties as trustee will either begin at the outset, if you are named a co-trustee, or can be triggered if your loved one becomes incapacitated. After your loved one has passed, you become the acting successor trustee.
If you are the trustee of a revocable trust, it is important to understand that your loved one no longer owns or controls the assets in the trust, and cannot make changes to the trust’s terms without the consent of the beneficiaries. Revocable or living trusts become irrevocable after your loved one passes away.
Credit Shelter Trusts
Trustees of credit shelter trusts have important duties, including ensuring that proper tax elections and allocations are made after your loved one dies. These trusts are used to reduce estate taxes. During your loved one’s lifetime, he creates this type of trust to shelter a certain amount of his estate from estate taxes, while giving the remainder of the trust to a separate trust share without incurring any tax.
A Generation-Skipping Trust may also be known as a dynasty trust. This trust is used to transfer substantial amounts of money tax-free to beneficiaries who are at least two generations below your loved one’s generation. If you are a trustee of this type of trust it is important to work closely with a good certified public accountant.
Qualified Personal Residence Trusts
Another type of trust that you might find yourself in charge of administering is a qualified personal residence trust. This trust removes the value of your loved one’s home or vacation house from his or her estate.
Irrevocable Life Insurance Trusts
Yet another type of trust designed to minimize estate taxes, is an irrevocable life insurance trust. An irrevocable life insurance trust is used to remove life insurance proceeds from your loved one’s estate. The funds are often used to help pay the costs of the estate when it is time to administer the trust, including funeral expenses, estate tax bills, and other costs of administration.
Qualified Terminable Interest Property Trusts
In today’s world, many families are “blended.” This meaning divorces, remarriages, and stepchildren may all be part of the dynamic. In these cases, qualified terminable interest trusts are sometimes used to direct assets. Qualified terminable interest trust can direct assets to particular relatives after the death of your loved one’s spouse passes away. While the spouse is alive, he or she may be entitled to receive income from the trust. Conversely, these trusts are more complex than a basic revocable trust. Therefore, it is important to seek assistance from an experienced attorney during the administration process.
If you are ready to start your case, then please give us a call or fill out our Get Help Now form. If you want a comprehensive overview of California trust litigation, then click here. If you have more questions about trust litigation, then you will plenty of useful information in our Learning Center.