What are the different types of trusts?
What are the different types of trusts?
There are many variations of trusts depending on your concerns, objectives, asset mix, and family dynamics, but they can generally be categorized into 3 different types of trusts.
Revocable living trusts - by far the most common type of trust, revocable living trusts allow you to avoid probate court and streamline the process of distributing assets to your loved ones in a timely and efficient manner.
Irrevocable trusts - less common, but potentially more powerful, irrevocable trusts are usually established for a specific situation or concern like protection a home from nursing home care, minimizing estate taxes, and protecting assets from divorce, bankruptcy, lawsuits, or creditors.
Nominee trusts - by far the most misunderstood and misused trusts out there, nominee trusts, are more commonly labeled as “realty trusts” and don’t follow the typical trust structure because the trustee has virtually no power other than to be seen as the title holder whereas the beneficiaries actually call all the shots. You will typically see nominee or realty trusts used to easily hide or shift assets outside of public view for convenience and privacy reasons.
Most clients who are married or who have a significant other will often start with a standard estate plan that consists of a joint revocable living trust, then upgrade to split revocable living trusts (one for each spouse) for tax planning and remarriage risk protection purposes. As clients get older and wealthier they may consider doing irrevocable trusts for certain assets or investments.
Nominee trusts and realty trusts will be recommended by your estate planning attorney as an extra tool to supplement your core trusts, but should never be used as standalone trusts or as the only trusts in your estate plan.
Do you already have a trust, but aren’t sure how it works? I’d be happy to review it for you and answer any questions you may have.
Would you like to set up a trust? I’d be happy to help you create a trust that addresses whatever concerns you may have.
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