Trusts fall into two main categories: revocable and irrevocable. Revocable trusts are set up by the individual (known as the “grantor”), often for their own benefit, and can be changed at any time. Irrevocable trusts are setup in a manner intending that they not be changed. Both types of trusts can be either living trusts or trusts which take effect upon death, known as testamentary trusts.
These are some examples of the many specific types of trusts serving myriad different purposes:
Life insurance trusts make funds available to pay estate taxes. This is especially useful when a person has a lot of real estate at the time of their death, but they lack liquid assets (i.e., they are “cash poor”). Such a person might have a large tax on the value of all of their real estate, but they would need cash to pay the tax. This is where a life insurance trust can help.
Qualified Personal Residence Trusts (QPRTs) remove the house from the estate—helpful for individuals who want to pass their house on to their children after a rental period.
Qualifying Domestic Trust (QDOTs) allow an individual to pass their assets on to their spouse if the spouse is a foreign citizen (otherwise, the spouse would have to be a US citizen).
Spendthrift trusts are useful for beneficiaries who struggle with handling money. These trusts are also valuable if the individual has creditor issues or if there is a potential divorce situation. A trustee is appointed to manage the money for the individual.
Supplemental needs trusts are useful for individuals who are disabled and are entitled to government benefits. The trust is used to provide for the individual’s needs which are not covered by the government benefits.
Trusts are a useful device to avoid probate in multiple states when real estate is owned in multiple locations.
There are also trusts for Medicaid planning purposes. This type of trust is a means of preserving assets against the possibility of a Medicaid lien.
Trusts are not difficult to establish. A qualified attorney writes a trust that will serve your purpose. Assets such as property deeds and re-titled bank and brokerage accounts are then transferred into the trust. The process takes only a matter of weeks, yet can be invaluable to your—and your loved ones’—security and prosperity. It is very important that these transfers be done for the trust to be effective. I have seen many examples where the individual set up the trust, but it was never funded; therefore was not helpful just when it was needed.
What kind of trust would best meet your needs? Contact us today to discuss the options.
Robert W. Shaw, Esq.
(914) 328-1222
E-mail Bob
Tags: Estate Planning, Irrevocable trusts, Life insurance trusts, Qualified Personal Residence Trusts (QPRTs), Qualifying Domestic Trust (QDOTs), Revocable Trusts, Robert W. Shaw, Trusts
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