Types of Trusts

25Nov
2016

Estate Planning

There are many types of trusts which are designed to serve many purposes. Every trust has very unique, specific rules and benefits and each should be carefully reviewed. In very general terms, some of the most common trusts include the following.

Living trusts are created by the grantor during the grantor’s lifetime.

Testamentary trusts are created by the grantor upon their death, generally in their will.

Revocable living trusts (RLTs), are trusts made by the grantor during their lifetime which can be freely amended or revoked by the grantor.Living trusts are also referred to as inter-vivos trusts.

Irrevocable life insurance trusts (ILITs) hold life insurance policies payable to beneficiaries upon the grantors death.

Asset protection trusts are designed to shelter assets from creditors. There are domestic asset protection trusts (DAPTs) in many states, including Ohio. Ohio legacy trusts are governed by the Ohio Revised Code Chapter 5816, which you can read here: ORC 5816 – Ohio Legacy Trust Act There are also foreign asset protection trusts (FAPTs) where the trust property is maintained in a different country. Ohio domestic asset protection trusts are commonly referred to as legacy trusts.

Charitable remainder trusts (CRTs) are designed to provide the grantor or the grantor’s children or other beneficiaries with income for a certain period of time and then to eventually give all the remaining trust property to a charity.

Charitable lead trusts (CLTs) are designed to provide income to a charity for a certain period of time, and then to distribute the remaining trust property to other beneficiaries.

Constructive trusts are an implied trust where a court determines from certain facts and circumstances that the grantor intended property to be held in trust, even though no formal trust document is executed.

Credit shelter trusts are designed to maximize the the estate-tax exemption and on the death of the grantor property in an amount up to, but not greater than the estate tax exemption amount which can then grow estate tax free for the life of the surviving spouse. Credit shelter trusts are also referred to as bypass trusts or family trusts.

Generation skipping trusts are designed to provide for beneficiaries two generations after you – usually your grandchildren.

Grantor retained annuity trusts (GRATs) are irrevocable trusts that provide an annuity to the grantor for a fixed period of time, and then the remaining trust property will pass to the named beneficiary.

Pet Trusts are designed to provide for the care of your pets by appointing a caretaker and providing funds for the care.

Qualified personal residence trusts (QPRTs) are designed to remove the value of your home from your estate for estate tax purposes.

Qualified terminable interest property trusts (QTIPs) are generally designed to provide income to a surviving spouse for the rest of their life and then to the remainder beneficiaries when the surviving spouse dies.

Special needs trusts are designed to provide for someone with a disability but not disqualify them from government assistance.

Spendthrift trusts are designed to protect assets from creditors.

Totten trusts are trusts created merely by designating a bank account of brokerage account to be “payable on death” (POD), “in trust for” (ITF) or “as trustee for” (ATF).

Voting trusts are trusts set up by shareholders that allow the trustee to vote during any shareholder meetings.

These descriptions of the various types of trusts are meant to be a very generalized, simplified explanation, and each of these trusts require very careful drafting and consideration. There are many other types of trusts. For more information on Trusts, and how they tie into broader estate planning topics, take a look at our in depth page on Estate Planning with Wills and Trusts.

If you want to speak with a Cleveland trust attorney, or an Akron trust attorney, call us today! Valente Law is an estate planning law firm serving clients in the Cleveland and Akron areas and uses trusts in almost all of the estate plans we draft for our clients. Call us today to get started on your trust!