Types of Trusts

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Before we discussed the different types of trusts, let’s go on thoroughly on the description of trusts. Trusts are effective investment tools used in managing and holding properties and assets. It can be customized accordingly to your needs and situations. Trusts are usually founded to empower a particular trustee in caring and managing your properties and assets for the benefit of your family as well as yourself or other designated beneficiaries. Depending of the kind of trusts you are creating, you can designate yourself or other people to be the trustee. Trusts basically have four elements that include beneficiaries, instructions, trust properties and trustee.

Basically, there are two major types of trusts namely the testamentary and the living trusts.

The testamentary trusts are often called as the family trusts that are initiated within the will of testament, which later on becomes effective upon death of the family member who designated the will. These trusts don’t save probate fees as the first death within the family will automatically direct to the estates for probate. With this, the trust is established. The main objective of testamentary trusts is to decrease the estate taxes as well as preserving incomes for the living spouse. This objective can help keep the asset amounts below the appropriate exclusion amounts, thus eliminating or reducing the estate taxes. The Charitable Remainder Trust or the CRT is also a form of testamentary trusts that can be established in transferring assets to a certain charity while retaining a stream of income for the lifetime of the living spouse. However, upon the death of the living spouse, the properties and assets are then passed to the charities and the amount of the remaining interests can be reduced for the income tax purposes of the gift of whatever year.

The living trusts are types of trusts that are established during the lifetime period of the grantor, which later on can be continued after death. It’s either irrevocable or unchangeable trusts, or it can be revocable or changeable trusts. Living trusts are usually set up to avoid some probate costs upon death as these types of trusts need to be probated. Compared to testamentary trusts, living trusts are not subject to the public disclosures during and after the administrative process of trusts. Also, living trusts are very useful in providing the management for older family members that is usually done through a trustee. These trusts help the grantor of advancing anyone who maybe incapacitated or disabled.

There are different types of trusts that can be used in estate planning. So, before choosing or creating your trusts, investigate thoroughly the ramifications and seek some good advises from legal counsels while you are drafting your trusts.