Types of Trusts and Their Various Uses in Estate Planning
Written by: Attorney Van P. Geeker
There are several types of trusts that you can establish for different purposes. Here is a short list of trusts with a brief description of possible uses or purposes.
Revocable “living” or inter vivos Trust: This type of trust is commonly used to avoid probate of the assets held by the trust at a person’s death. It can also serve as a more flexible arrangement to manage a person’s assets and financial affairs later in life in the event of a physical or mental disability.
Irrevocable Trusts: There are several different types of irrevocable trusts that are often established to accomplish specific purposes or estate planning goals. Here are a few examples:
- Irrevocable “Gift” Trusts can be created to receive and manage investment assets for a set period of time for the benefit of family members such as children or grandchildren. Distributions are generally made for health, education, maintenance, and support (HEMS) purposes.
- An Irrevocable “Dynasty” Trust is a special type of gift trust that can be designed to last for several generations while providing HEMS benefits to family members. Please note that this type of trust has more complex income, estate and gift tax considerations than the other trusts discussed in this article.
- Special Needs Irrevocable Trusts are sometimes established to provide supplemental benefits for disabled family members with restrictive distributions in a way that does not jeopardize any governmental assistance benefits that might be otherwise available.
- Irrevocable Life Insurance Trusts (ILIT) are often employed to provide estate tax free liquidity in a person’s estate plan. As you might suspect, there are significant income, estate and gift tax considerations with a properly designed ILIT.
As mentioned above, tax considerations are very important when creating any type of trust and are beyond the scope of this article.
Please contact us if you would like to meet with one of our tax or estate planning attorneys to discuss how trusts might help you and your family accomplish one or more estate planning goals.