Types of Trusts You May Need
You may choose from several types of trusts, but each of them will serve the same basic function. You, the trustor (also called the settlor or grantor), create the trust and place some or all of your assets and funds into it. You designate a trustee, who has the fiduciary responsibility of managing everything in the trust for the benefit of one or more beneficiaries. Trustees and beneficiaries may be individuals or organizations.
Trusts generally fall into one of two categories:
- Revocable trusts. Also known as a living trust, a revocable trust is one that takes effect as soon as you create it. You can designate yourself as the trustee, which allows you to manage the assets and amend or revoke the trust at any point during your lifetime. It can help your beneficiaries avoid probate, but it is typically subject to estate taxes. Once you pass away, it becomes an irrevocable trust.
- Irrevocable trusts. An irrevocable trust transfers your assets out of your estate, which is why you cannot amend or revoke the trust once you create it. This is why irrevocable trusts are effective for avoiding estate taxes, as the assets are technically no longer a part of your estate. Any income generated by the assets in the trust is protected from tax liabilities, as well. Like revocable trusts, irrevocable trusts may help your beneficiaries avoid probate.
These are broad categories, and each category contains many specific types of trusts. When you bring your case to Sallen Law, our attorney can assess your legal and financial circumstances to determine which trust will provide the greatest benefits and minimize liabilities.