If you are a sophisticated California estate planner, your estate plan likely consists of a will and several trusts. Have you ever wondered how many kinds of trusts you can choose from? As FindLaw explains, the answer is “many.” All of them, however, fall into two basic categories: revocable and irrevocable. All of them also have three basic parties: the grantor, the beneficiary or beneficiaries, and the trustee.
As its name implies, you cannot alter or revoke an irrevocable trust or its provisions once you establish it. Conversely, you can revoke and/or change the provisions of a revocable trust any time you wish after establishing it. You can also stipulate that a revocable trust become irrevocable when you die.
One of the biggest advantages of any trust is that if you die while it is in existence, it and the assets it contains avoid going through probate. Various types of trusts provide additional benefits, including income, estate and gift tax benefits, specific to them and the reason(s) why you establish them.
Common trust types
You likely have heard of the following types of trusts and may have one or more included in your estate plan:
- Asset protection trust
- Charitable trust
- Special needs trust
- Generation-skipping trust
- Spendthrift trust
- Tax by-pass trust
Less common trusts
You may not, however, have heard about Totten trusts. Most people use these types of revocable trusts with regard to their bank accounts, savings accounts, investment accounts, certificates of deposits and other monies generally managed by a financial institution. Totten trusts provide a safer method than joint ownership of passing such assets at your death.
You likewise may never have heard about constructive trusts. Only a court can establish a constructive trust once it determines that even though you never set up an actual trust to contain certain of your assets, you nevertheless implied such a trust with regard to them by means of your verbal or other intentions as to how these assets could be used and for what purposes.
Given the numerous trust types available to fit your various particular needs and achieve your various particular purposes, your best strategy when contemplating trusts is to fully discuss your goals and objectives with your estate planning attorney. This is general educational information and not intended to provide legal advice.