Two Types of Trusts

  1. Revocable
  2. Irrevocable

AND

  1. Living Trusts
  2. Testamentary Trusts

10 Types of Trust

  1. Revocable Living Trust (most common)
    1. Put assets in a trust and avoid probate.
    2. The trust documents replace your will.
    3. You assign a trustee that takes over when you die
  2. Trust for Minors. (testamentary trust)
    1. Keeps the assets under the control of a trustee instead of the courts
  3. Medicaid Trust (irrevocable trust)
    1. A trust that holds assets so they can be excluded from Medicare considerations.
    2. Need to be established 5 years before the medicare application process
  4. Special Needs Trust
    1. Trust to provide for special needs children’s without giving them actual assets to protect their children’s government benefits
  5. Testamentary Trust
    1. Terms of the trust are in the last will and testament
    2. Trust doesn’t exist until the creator of the will is deceased
  6. Spousal Trust
    1. Other names - Credit Shelter Trust, AB Trust, q-tip trust
    2. Spouse dies, spouse has an estate, and a surviving spouse.
    3. Protects the owner’s assets from stupid decisions made by surviving spouse. (like dad lol)
    4. Trustee would not be the spouse
    5. Makes assets available to surviving spouse
  7. Irrevocable Life Insurance Trust 1. Mom and dad gift money to their children into a trust 2. The trustee uses gifted funds to purchase life insurance on mom and dad. 3. The insurance pays out when mom and dad die and insurance payout can be distributed or used to pay estate tax
  8. Charitable Trust - Charitable Remainder Trusts & Charitable Lead Trust
    1. Remainder - Any remaining assets out of the trust at the person
    2. Achieves tax deductible donation now while the charity may not receive assets of the trust until after the
  9. Asset Protection Trust
    1. Sue proof. Isolate assets into entities so liability doesn’t touch too large a pool of assets. That’s the idea.
  10. Crummey Trust
    1. Gives the beneficiaries rights for a specified term to immediately access money contributed to the trust.
    2. If they don’t take it, then the money is locked into the trust according to the terms of the trust.
    3. Essentially giving you the ability to ‘gift’ money to your kids free of estate tax lifetime exemption limit reductions

Purpose, Use and Taxation