Types of Trust Defined
There are many different types of trusts. A trust serves various purposes, including estate planning, tax minimization, and asset protection. It is essential to consult with a legal or financial professionals to determine the most suitable type of trust for your specific circumstances.
- Testamentary Trust: Created through a last will and testament, this type of trust is established after the testator’s death.
- Living Trust: Also known as an *inter vivos* trust, a type of trust is established during the settlor’s lifetime and can be revoked or amended.
- Bare Trust: A simple type of trust where the beneficiary has immediate access to the trust assets and income.
- Interest in Possession Trust: Beneficiaries have the right to income from the trust, but not the underlying assets.
- Irrevocable Trust: Once established, an irrevocable trust cannot be changed or revoked; it is intended to achieve specific goals, such as minimizing estate taxes.
- Grantor Retained Annuity Trust (GRAT): A type of irrevocable trust that allows the settlor to receive annuity payments from the trust for a specified period.
- Qualified Personal Residence Trust (QPRT): Another type of irrevocable trust that allows the settlor to transfer a residence to the trust while retaining the right to live in it for a specified period.
- Spendthrift Trust: A trust designed to protect assets from the beneficiary’s creditors or overspending.
- Protective Trust: A trust where the settlor specifies themselves as a beneficiary, providing protection for the assets.
- Trust for Vulnerable Beneficiaries: A trust designed for beneficiaries who are unable to manage their assets, such as individuals with disabilities.