Lesson 27: Types of Trusts

Trusts play a critical role in estate planning, offering various benefits such as asset protection, tax savings, and efficient transfer of wealth. This lesson explores different types of trusts and their specific applications.

Revocable Trusts

Also known as living trusts, revocable trusts allow the grantor to retain control over the assets during their lifetime. They can be modified or terminated at any time.

Irrevocable Trusts

Irrevocable trusts cannot be modified or terminated without the permission of the beneficiary. These trusts provide substantial tax benefits and asset protection.

Testamentary Trusts

Testamentary trusts are created through a will and become effective upon the death of the grantor. They are useful for managing assets for minor children or beneficiaries with special needs.

Charitable Trusts

Charitable trusts, such as Charitable Remainder Trusts and Charitable Lead Trusts, provide tax benefits while supporting charitable causes. Learn more about these in our Introduction to Charitable Remainder Trusts.

Special Needs Trusts

Special Needs Trusts are designed to benefit individuals with disabilities without affecting their eligibility for government assistance programs.

Spendthrift Trusts

Spendthrift trusts restrict the beneficiary's ability to access the trust principal, protecting the assets from creditors and the beneficiary's poor financial decisions.

Diagram of Trust Types

The following diagram illustrates the various types of trusts discussed in this lesson:

mermaid graph TD A["Types of Trusts"] --> B["Revocable Trust"] A["Types of Trusts"] --> C["Irrevocable Trust"] A["Types of Trusts"] --> D["Testamentary Trust"] A["Types of Trusts"] --> E["Charitable Trust"] A["Types of Trusts"] --> F["Special Needs Trust"] A["Types of Trusts"] --> G["Spendthrift Trust"]

Further Reading

• Trust Law on Wikipedia
• Books on Trust Law on Amazon
• How Trusts Affect Estate Taxes
• Setting Up a Trust