Orinda Trust Attorney

Common Types of Trusts

Examples of the types of trusts that can be created include:

• Living trusts – Also known as revocable trusts, living trusts are trusts that the grantor or trust-maker may change or revoke during his or her lifetime.
• Marital trusts – A trust established by one spouse that allows the surviving spouse to avoid paying estate taxes during his or her lifetime.
• AB trusts – A joint trust created by a married couple, which is divided into two upon the death of one of the spouses and defers federal estate taxes until the death of the surviving spouse.
• Charitable trusts – A trust that benefits a particular charity or charities, or that is intended to generally benefit the public through charitable endeavors. These trusts are used to lower estate or gift tax liabilities since even deferred trust contributions may be immediately recognized by charities for tax purposes.
• Special needs trusts – Allows for money or other assets (such as an inheritance) received by a special needs person to not adversely affect the person’s eligibility for receipt of government or other benefits. The beneficiary cannot control the amount or frequency of distributions or revoke the trust.
• Spendthrift trusts – A trust established for a beneficiary, which does not allow the beneficiary to sell or pledge the trust’s assets, thereby protecting those assets from the beneficiary’s creditors until the trust corpus is distributed out of the trust.
• Tax bypass trusts – A trust that allows a spouse to leave money to the other spouse and limit the amount of federal estate tax payable upon the death of the other spouse, thereby potentially saving the spouses’ children or other heirs significant federal tax liabilities.
• Asset protection trusts – These trusts are intended to protect assets from the claims of future creditors. The trust is often established for a term of years, and the grantor is not designated as a beneficiary, but can usually recover the assets at the end of the trust term.
• Qualified Terminable Interest Property Trusts (QTIPs) – A QTIP trust is considered a more restrictive form of a marital or AB trust, as surviving spouses have more limited access to the trust assets since they have restrictions on the disposition and withdrawal of trust principal and cannot directly dispose of trust assets following their death.
• Qualified Personal Resident Trusts (QPERTs) – A type of irrevocable trust that allows a person to remove their primary residence from their estate to reduce gift taxes when transferring that asset to beneficiaries.
• Generation-skipping trusts – Allows a grantor to pass assets to their grandchildren and permits their children to avoid having to pay estate taxes on those assets despite the fact that the children may be entitled to distribution of income generated by the trust’s assets.
• Testamentary trusts – These trusts are created by the grantor’s will, with assets allocated to the trust according to the terms of the will.
• Irrevocable life insurance trusts – Allows grantors to exclude life insurance proceeds from their estate and their surviving spouse’s estate for federal estate tax purposes.