Trusts are highly flexible documents that trust grantors can draft carefully to suit their needs. There are also numerous types of trusts to choose from when planning your estate. There are three common types of trusts that the average California resident might consider depending on his or her situation.
Revocable trusts: The trust creator sets up a revocable trust while he or she is still alive and maintains complete control of the trust in terms of modifying, revoking or changing it. These are often referred to as “living trusts.” They are most valuable in permitting assets within the trust to bypass probate at the time of death.
Irrevocable trusts: Quite the opposite of a revocable trust, an irrevocable trust cannot be dismantled or reversed after the trust grantor creates it. The assets placed in the trust will remain trust property and be administered by the trustee in accordance with the terms of the trust and for the benefit of the beneficiaries of the trust. Irrevocable trusts are useful documents when someone wants to fund a trust with a life insurance policy for the benefit of someone else. They are also useful for tax planning purposes.
Asset protection trust: These trusts will protect the trust grantor’s assets from future creditors. Often, these trusts will be irrevocable for a set period of time and the trust creator will not be the beneficiary. Upon termination of the trust, the assets will then be returned to the trust grantor, hopefully when the assets are safe from being attacked by creditors.
There are so many more types of trusts, such as charitable trusts, pet trusts, spendthrift trusts and special needs trusts, but we don’t have enough room to describe them all here. If you think you and your family could benefit from creating a trust, investigate all your options thoroughly to select the most appropriate type of trust for your needs.