All trusts fall into one of two categories: revocable or irrevocable. However, within these categories, many types of trusts exist to fulfill a broad range of needs and objectives. Below represents a sample of some of the trusts in which we serve:
A living or revocable trust allows you to remain both the trustee and the beneficiary of the trust while you’re alive. You maintain control of the assets and receive all income and benefits. Upon your death, a designated successor trustee manages and/or distributes the remaining assets according to the terms set in the trust, avoiding the probate process. In addition, should you become incapacitated during the term of the trust, your successor or co-trustee can take over its management.
In a grantor trust, the grantor or person setting up the trust retains certain powers over the trust administration and property. These powers include the power to revoke (amend or terminate) the trust. The grantor also keeps control over the property inside the trust. The assets of the trust generally do not leave the grantor’s estate for estate or income tax purposes. The trust often uses the grantors social security number and does not have a tax identification number (TIN) or file its own return.
An irrevocable trust is a trust that cannot be changed or cancelled at any time. This trust is a separate legal entity and its own taxpayer. The terms of many irrevocable trusts, however, allow tremendous flexibility. While many irrevocable trusts are created upon death, irrevocable trusts set up before death are often used to hold life insurance policies, gifts of assets made during life to allow for growth beneficiaries at a future time, or funds for future charitable donations.
A Survivor’s Trust is a trust created by an individual during life, and becomes irrevocable (cannot be changed) after his or her death, to provide for a surviving spouse, domestic partner, or other loved one(s). “Survivor’s Trust” is a general term for a variety of common trusts, including trusts referred to as an: A Trust, Marital Trust, B Trust, Family Trust, Bypass Trust, or Credit Shelter Trust, among others.
Charitable Remainder Trusts
A charitable remainder trust is an irrevocable trust with both income and remainder interests. Income is paid to designated beneficiaries for a term of years or lifetime. The remainder interest is paid to qualified charities as specified in the trust document when the trust terminates. Tax benefits can often be realized while maintaining a stream of income and providing for charities in the future.
Charitable Lead Trusts
In a charitable lead trust, the trust pays either a fixed percentage of assets of dollar amount to a qualified charity for either a set number of years or for the life or lives of the individuals. When the term of the trust has ended, the remaining assets are distributed to the donor or heirs as set forth in the terms of the trust. The tax benefits can often be realized while providing current benefits to charities and residual balances to heirs.
Special Needs Trusts
Special needs trusts are often established by the parents or relatives of a disabled child, with funds to be used to pay for supplemental or living expenses of the disabled person not paid by other sources. Special needs trusts can also be set up with the disabled person’s own funds, again to provide for supplemental medical or living expenses.
Guardianships are established to protect and handle the assets of either minors or adults who are generally unable to manage their money. Gaurdianships are appointed by the court and contain specific instructions concerning the management of the account and its funds. The court issuing the order will also monitor the account management, typical through court accounting, to ensure the courts instructions are followed and for the protection of the individual.
Rabbi trusts are set up by corporations as a non-qualified, deferred compensation arrangement to benefit selected executives for retirement purposes.
Irrevocable Life Insurance Trusts
An irrevocable life insurance trust (ILIT) is typically used to shelter the death of an insurance policy from estate taxes and may provide liquidity to pay estate taxes and settlement costs. A trust is created, and then the trust purchases and owns a life insurance policy. Upon death, the insurance proceeds are paid out in accordance with the terms of the trust.
A private foundation is a charitable organization created and funded by a donor as a trust or a non-profit organization, which is designed to achieve one or more specific charitable functions