An Overview Of The Different Types Of Trusts In Estate Planning

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A trust is essentially a right in property that is held in a fiduciary relationship. This means one party (the trustee) keeps the titled to the trust property for the benefit of another (the beneficiary). There are two ways to create a trust: one is made during a person's lifetime and lasts even after a person's death; and two, a trust that is done via by a will and realized after death.

Keep in mind that assets that are put into a trust become part of the trust itself and not owned by the trustee. This means that such assets will now be subject to the rules and restrictions of the trust contract. There is a variety of trusts (asset protection, charitable, special needs, and constructive, to name a few), but the basic types are revocable and irrevocable trusts.

Revocable trusts are those done while the trustmaker is still alive. Also known as a living trust, it can be altered, changed, modified, or revoked entirely. Here, the trustmaker transfers the title of a property to a trust and serves as its initial trustee. They have the power to remove the property from the trust during their lifetime.

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An irrevocable trust refers to the type of trust that cannot be altered, changed, modified, or revoked after it has been created. Once a property has been moved to an irrevocable trust, no one, not even the trustmaker, can take it out of the trust. One example of what an irrevocable trust can hold is a survivorship life insurance, often used for estate tax planning purposes in large estates.

John Peck is an attorney with Legacy Lawyers in eastern North Carolina, where he currently practices in the areas of estate planning and elder law. He is a charter member of Elder Counsel and the Advanced Planning Legal Network. For more on Atty. Peck’s background and work, drop by this website.