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Incorporation Guide 101
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Trusts

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Trust Types

there are several different types of trusts, each designed for specific purposes and with unique features. Here’s a breakdown of the most common types:
1. Revocable Trust (Living Trust)
Description: A trust that can be altered or revoked by the grantor (creator) during their lifetime. It allows for the management and distribution of assets while the grantor is alive and simplifies the estate process after death.
Features:
Can be changed or terminated by the grantor.
Avoids probate, making the transfer of assets easier upon the grantor’s death.
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2. Irrevocable Trust
Description: A trust that cannot be altered or revoked once it has been established. The grantor gives up control over the assets placed in the trust.
Features:
Provides asset protection and can help reduce estate taxes.
Often used for estate planning and charitable purposes.
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3. Testamentary Trust
Description: A trust that is created through a will and becomes effective only upon the death of the grantor.
Features:
Often used to manage assets for minor children or beneficiaries with special needs.
Must go through probate before the trust is activated.
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4. Special Needs Trust
Description: A trust designed to benefit a person with disabilities without disqualifying them from government benefits such as Social Security or Medicaid.
Features:
Provides financial support to the individual while preserving their eligibility for government assistance.
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5. Charitable Trust
Description: A trust established to benefit a charitable organization or cause.
Types:
Charitable Remainder Trust (CRT): Provides income to the grantor or other beneficiaries for a specified period, with the remainder going to a charity.
Charitable Lead Trust (CLT): Provides income to a charity for a specified period, with the remainder going to non-charitable beneficiaries.
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6. Blind Trust
Description: A trust where the beneficiaries do not have knowledge of the assets or the identity of the trustee managing the trust.
Features:
Used to avoid conflicts of interest, particularly in cases where the grantor or beneficiary holds a position of influence or authority.
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7. Family Trust (Discretionary Trust)
Description: A trust created to benefit family members, allowing the trustee discretion over how and when to distribute assets.
Features:
Provides flexibility in asset distribution and can offer protection from creditors.
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8. Asset Protection Trust
Description: A trust designed to protect the grantor’s assets from creditors and legal judgments.
Types:
Domestic Asset Protection Trust (DAPT): Established under state laws within the U.S.
Offshore Asset Protection Trust: Established in foreign jurisdictions with strong asset protection laws.
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9. QTIP Trust (Qualified Terminable Interest Property Trust)
Description: A trust that allows a surviving spouse to receive income from the trust’s assets during their lifetime, with the remainder going to other beneficiaries after their death.
Features:
Provides for a surviving spouse while ensuring the remaining assets go to other beneficiaries.
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10. Pour-Over Trust
Description: A trust that is designed to receive assets from a will, effectively transferring assets from the grantor's estate into the trust upon death.
Features:
Ensures that any assets not explicitly transferred to the trust during the grantor's lifetime are still managed according to the trust's terms.
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11. Purpose Trust
Description: A trust established to achieve a specific purpose or goal, such as maintaining a family grave or supporting a particular cause, rather than benefiting individual beneficiaries.
Features:
Focuses on achieving a particular objective, which can be non-charitable.
Often used for long-term projects or goals that do not directly benefit individuals.
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12. Land Trust
Description: A trust used to hold and manage real estate. The trustee holds legal title to the property, while the beneficiary retains the benefits of ownership.
Features:
Provides privacy by keeping the owner’s name off public records.
Often used for real estate investment and asset protection.
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13. Sovereign Trust
Description: A trust established to manage and protect assets on behalf of a sovereign entity or governmental body.
Features:
Used for managing national or governmental assets and resources.
Can be involved in large-scale asset management and international transactions.
Each type of trust serves a specific purpose and can be tailored to meet the needs of the grantor and beneficiaries. Consulting with an estate planning attorney can help determine which trust is best suited for your goals and circumstances.
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