Trusts are easy to understand: they basically establish a legal entity that will hold funds or assets for the person who created the trust—called the "grantor" or "donor." The grantor will appoint an entity that will manage the trust, such as a bank or trust department, and a beneficiary—the person who will ultimately benefit from the trust.
There are essentially two different types of trusts: living (which operate during the grantor's lifetime) and testamentary trusts—trusts created under a Last Will that will come into effect after the grantor's death.
Basic Classification of Trusts
Several other classifications of trusts also exist, designed to determine the way in which the assets will be managed and taking into account the specific types of assets and funds attributed to them:
- Revocable trusts allow you to have more control over the funds in case you wish to revoke or change various terms, while irrevocable trusts require the presence and consent of the beneficiary for such modifications.
- Qualified personal residence trusts are designed to basically remove the value of your property and are best applied to homes likely to appreciate in value.
- Credit shelter trusts allow you to write a will that can pass a portion of your estate to your spouse or other beneficiary tax-free.
- Generation-skipping trusts are typically trusts that make it easy to select only the second generation of descendants as beneficiaries (usually grandchildren).
Setting up a trust fund can be a great advantage, regardless of the purpose you have in mind. As long as you do some research on finding out which type of trust would best apply to your situation, it will be quite easy to get the most beneficial results possible out of the endeavor. For more information on which trust option may be best for you or your clients please contact the Goralka Law Firm.