The type of Trust you select will, of course, depend upon your
personal financial situation and future objectives. Some Trust
alternatives include Revocable Living Trusts and Irrevocable
Trusts.
Revocable Living Trusts
A Revocable Living Trust is a flexible estate-planning tool that
can be used under a variety of circumstances: while you're still
living, in the event you are incapacitated and when you die.
Under the terms you stipulate as grantor of a Revocable Living
Trust, you can retain a corporate trustee to provide investment
management services, collect income from the trust, and reinvest or
distribute the income according to your wishes. The trustee can
also pay bills from the trust and assume responsibility for
recordkeeping.
You may serve as your own trustee, but a corporate trustee can
relieve you of responsibilities you have neither the time or
desire, or, perhaps, the ability to handle. You retain full control
over the assets in the trust, as well as the right to amend or
revoke the trust document at any time.
Irrevocable Trusts
With an irrevocable trust, the grantor cannot alter the terms or
recover the assets during the trust's existence. Some of the more
common types of trusts include:
- Credit Shelter Trusts
Credit Shelter Trusts, also known as the By-Pass Trust, are
structured to provide the surviving spouse with annual income and
access to principal.
- Charitable Remainder
Trusts
Many individuals use the Charitable Remainder Trust as a vehicle to
enable them to sell a highly appreciated asset without paying
immediate capital gains taxes, reinvest the full amount and
increase their lifetime income.
- Irrevocable Life Insurance
Trusts
With a Life Insurance Trust, you can reduce your taxable estate.
You simply place or purchase a life insurance policy inside of a
Trust and pay premiums in the form of annual gifts to your
beneficiaries.
- Trusts For Minors
A Minor's Trust is an irrevocable trust that can serve as an
alternative to a Uniform Gifts to Minor's Account
(UGMA).