When someone is creating their estate plan, they will generally establish one or more trusts. There are several different types of trusts, each designed for unique, specific situations. However, the general purpose of establishing a trust is to ensure all beneficiaries will maximize their inheritance and to move the probate process along in the smoothest way possible. Think of a trust as a simple contract between the estate and a third party that is in charge of the administration of the trust. This third party is known as the trustee. The person you appoint as your trustee will have a fiduciary duty to the beneficiaries of the trust. If you are a trustee or are considering creating a trust, you most likely wish to know more about the different types of trusts that exist. If so, you’ve come to the right place. Please read on to learn more.
What is the difference between a revocable and an irrevocable trust?
An irrevocable trust requires the grantor to revoke all of his or her rights to the ownership of the trust, thereby preventing the trust from ever getting terminated or changed without the beneficiary’s permission. This is because the person who created the trust effectively gave up all of his or her rights to the assets upon creation. A revocable trust, on the other hand, can be modified or terminated by the grantor at any time, as long as its creator is mentally capable of handling his or her affairs without the beneficiary’s permission.
What are the other types of trusts?
Some additional types of trusts you may wish to consider, depending on your situation, are as follows:
- Special Needs Trust: A special needs trust is designed for loved ones who have a disability. This trust will ensure they receive the financial support and potential benefits through the government they need.
- Irrevocable Life Insurance Trust: Through this trust, an individual can remove their life insurance from their estate to help free beneficiaries of the tax consequences of their life insurance policy, and pay estate costs.
- Testamentary Trust: This trust is created as part of the grantor’s will, and only becomes effective after the grantor passes away.
- Charitable Trusts: In a charitable trust, the beneficiary is a charitable organization. This trust establishes a way to distribute assets to a charitable organization. Oftentimes, charitable trusts also help implement income or estate tax planning methods for the grantor.
Contact our experienced Maryland firm
The attorneys at JD Katz have years of experience compassionately guiding clients in Maryland through the estate planning and administration process. Our firm also has experience with matters of elder law, business law, tax law, and litigation. For a legal team that will put your needs first, contact JD Katz today.