For a person who is dealing with any estate that has one or more trusts involved, knowing some specifics about trusts can often help them better understand what is going on. There are many different types of trusts that can be used to handle estate matters.
Are all trusts made before a person passes away?
Not all trusts are formed before a person dies. In some cases, a will can establish the need for a trust. The trust is then formed upon the person's death. Some trusts are formed while a person is still living.
What are revocable and irrevocable trusts?
A revocable trust is one that can be changed while the trustmaker is still living. An irrevocable trust is one that can't be changed at all once it is made.
What is a charitable trust?
A charitable trust is one that benefits a particular charity upon the death of the trustmaker. In some cases, this type of trust can benefit the public.
What is an asset protection trust?
An asset protection trust is one that is formed to provide protection against the claims from future creditors. Generally, these are irrevocable for a specified amount of time. In some cases, these trusts are set up outside of the United States.
What is a tax by-pass trust?
This type of trust allows a spouse to pass on assets to his or her spouse. The amount of the federal estate tax imposed when the second spouse dies is limited when these trusts are used.
What is a Totten trust?
A Totten trust is used to pass money from the trustmaker to the beneficiary. Real property can't be placed in this type of trust.
What is a spendthrift trust?
A spendthrift trust takes away a beneficiary's right to pledge away or sell their portion of a trust. The assets in this trust are protected from the creditors of the beneficiary.
What is a special needs trust?
Some people who receive government benefits would be disqualified by a lump-sum inheritance. A special needs trust has special rules that make it a legal option for an inheritance for people who receive government benefits.
What is a constructive trust?
A constructive trust is established by a court based on certain facts and circumstances. It is sometimes called an implied trust.
Deciding what trust is appropriate for a person is often a complex decision. Gathering all the facts about the trust options can help people to make a decision about what type of trust they want to use.
Source: FindLaw, "Types of Trusts," accessed April. 01, 2015