One of the most important things an individual can do in their lifetime is to create a comprehensive estate plan. While writing a will is perhaps the cornerstone of any estate plan, many people also include trusts in their estate plans to help protect their assets as well. Essentially, the person who creates the trust, a trustor, gives a third-party, known as the trustee, the right to manage their assets on behalf of the trustor’s beneficiaries. There are several different types of trusts that you may choose from, which is why it is so critical that you continue reading and speak with our knowledgeable Pennsylvania estate planning attorneys to learn more about the different types of trusts and which one best suits your needs. Below is a list of some of the most common trusts and their functions.
- Revocable Trusts: These are perhaps the most common type of trust. Essentially, a revocable trust is one that the trustor places his or her assets in and can modify or terminate the trust whenever he or she wishes, as long as he or she is not incapacitated.
- Irrevocable Trusts: These trusts require the trustor to give up his or her rights to the assets he or she places in the trust upon creation, thereby relinquishing their right to terminate or modify the trust’s terms.
- Charitable Trusts: These are fantastic trusts for those who wish to donate or contribute to certain charitable organizations upon their passing, especially if they did not have the financial means to do so in their lifetime. The two main types of charitable trusts are charitable leads trusts and charitable remainder trusts. Essentially, in a charitable leads trust, trustors may choose the charity they wish to receive interest from their gift for a designated timeframe, while in a charitable remainder trust, charities can receive all assets when the trust term ends, though until the term ends, the donor will receive the interest.
- Marital Trusts: These trusts are for surviving spouses and generally permit assets within the trust to be distributed to the spouse, or to be used for the spouse’s benefit with the Federal Estate Tax or Federal Gift Tax deferred until their death.
- Life Insurance Trusts: When you create a life insurance trust, you are most likely looking to remove your life insurance plan from your estate, which will make it so your beneficiary will not have to pay taxes on your life insurance policy.
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