Trusts provide many estate planning benefits ranging from avoiding probate proceedings to managing and controlling spending and investments to protect beneficiaries from poor judgment and waste. There are different types of trusts that focus on certain objectives of the creator of the trust known as the “grantor,” “settlor,” or “trustor.”

Below provides a summary of a few of the different types of trusts commonly used in estate planning:

Revocable/Living Trust

A revocable trust is also referred to as a “living trust” can be changed or revoked at any time as long as the person who created the trust is still alive and mentally competent. Revocable trusts are extremely valuable to avoid probate proceedings upon the passing of the grantor, however, in Florida and other states, they do not provide asset protection from creditors of the grantor while he or she is living. Some other advantages of a revocable trust include spendthrift provisions to protect beneficiaries and keeping intact the privacy of an individual’s estate. A revocable trust can provide an efficient means to distribute assets to trust beneficiaries.

Irrevocable Trust

Unlike a revocable trust, an irrevocable trust cannot be altered or revoked by the grantor after it has been created. Generally, upon property or assets being transferred to the trust, it cannot be removed or modified by the grantor. Also, the grantor may not add or remove beneficiaries or change the terms or provisions of the trust. Individuals with large estates explore using this tool to provide asset protection against creditors and certain tax benefits.

Charitable Trust

A charitable trust is established to benefit two or more beneficiaries having a split interest in a trust which is comprised of a charitable organization and a non-charitable beneficiary. There are two types of charitable trusts: (i) charitable lead trusts; and (ii) charitable remainder trusts. For instance, in a charitable lead trust, the charitable beneficiary first receives an income stream for a certain amount of years, and thereafter, the remainder of the trust is distributed to the non-charitable beneficiary. Conversely, with a charitable remainder trust, the non-charitable beneficiary first receives an income stream for a certain amount of years, and thereafter, the remainder of the trust is distributed to the charitable remainder. Charitable trusts provide tax benefits such as a charitable contribution deduction for the grantor or the estate of the grantor.

Special Needs Trust

A special needs trust includes provisions designed to protect the eligibility of a physically or mentally disabled trust beneficiary for need-based government benefits such as Medicaid or supplemental security income. A parent or a guardian can create a special needs trust for a disabled child as part of their general estate plan. This type of trust is effective to provide additional assistance to a disabled beneficiary in addition to receiving government benefits provided that said beneficiary does not have control over the amount or frequency of distributions they receive from the trust. This tool can provide a parent or a guardian with peace of mind that the disabled beneficiary will be taken care of upon their passing.

Testamentary Trust

A testamentary trust is created upon the death of the grantor and is formed pursuant to the terms and provisions contained in a will. Typically, a will provides instruction on when and how the trust will be created and comes into effect upon the grantor’s death. Unlike revocable and irrevocable trusts, a testamentary trust will undergo probate proceedings and provides less privacy protection than other types of trusts.

At Waugh PLLC, our attorneys are highly knowledgeable and experienced in estate planning and can create a comprehensive estate plan specifically tailored to meet your family’s needs.

If you have any questions or would like to schedule an appointment, please email us at info@waughgrant.com