There are several types of trusts that can be created to protect assets and ensure the appropriate passage of wealth to beneficiaries. The most common trusts are:
- Inter vivos trust (aka “Revocable Living trust”)
- Testamentary trust
- Irrevocable trust
A Living trust is a legal document that is created by the trustor that gives specific instructions to how a trustor would like their assets to be managed and eventually dispersed. Control of trust assets are still controlled by the trustor and the assets or language in the trust can be changed at any time. A Living trust is similar to a Will in this sense but the main difference is that a Living trust is created during the lifetime of the trustor, it’s effective immediately, it’s private (it’s not required to be filed in a probate court) and can be used during the life of the Trustor to benefit the trustor and then continue to be managed for the benefit of the beneficiaries upon the Trustor’s passing.
A Testamentary trust is a trust contained in and created by a last will and testament. It provides for the distribution of all or part of an estate and often contains proceeds from a life insurance policy held on the person establishing the trust. There may be more than one testamentary trust per will and they are created to receive assets for beneficiaries in the will that might not be ideal candidates to receive outright gifts, such as minors or those with a disability.
An Irrevocable trust is similar to revocable trust because assets are placed in the ownership of the trust. However, the main difference is that once the assets are in the trust, it is irrevocably in the name of that trust and the trust can rarely be revoked or modified solely by the Trustor. This area of estate planning and probate can be hard to navigate so appointing an attorney to draft and help administer the trust will aid the trustee in executing the provisions of a trust.
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