Trust is a legal entity in which you can place certain assets to accomplish specific goals. There are many different types of trusts, each used for different purpose. The following are some of the most common types of trusts:
Revocable Trust – This is a trust that you can make changes to at any time, or even be revoked the trust entirely. It is used for testamentary planning to avoid or ease the process of probate.
Irrevocable Trust – Most often used for lifetime planning, involving gifting, business planning and succession, wealth succession, pre-marital planning, asset protection and planning for lifetime events (such as children’s marriages, new grandchildren, new business ventures, loss of job or medical insurance, retirement)
Special Needs Trust – created to help provide care for chronically disabled individuals (children, parents, siblings). Can be created during lifetime or at death.
Generation Skipping Trust – If you want to pass money down to your grandchildren, or other heirs at least two generations away, this type of trust can help accomplish that goal while bringing significant tax savings.
Charitable Trust – You can leave an income stream to a specific charity in a trust and leave the remainder for your descendants (or the other way around) to take advantage of charitable income tax deductions or estate tax deductions.
Business succession trust – used to centralize control over family business or assets.
Life insurance trust – created to hold a policy on your life (or a policy on a life of another individual). This trust presents an effective way to give your heirs easy access to cash at you death to payfor your death taxes or to ensure available liquidity if you have a relatively illiquid estate and worry about a fire sale at death.