Trust Overview
Trust Overview
Many different types of trusts exist and can serve a variety of purposes. Trusts can also be very advantageous for some individuals and unnecessary for others. Discussing the types of trusts, their advantages and appropriateness for each individual, is a crucial step in determining whether a trust should be part of one’s estate plan.
Trusts can be either revocable or irrevocable. An irrevocable trust is similar to making a gift. The grantor cannot revoke the trust or change its terms in the future. Any assets placed into the trust are controlled by the terms of the trust. The grantor no longer has any ownership of those assets and no rights to those assets or their use, other than as stated in the trust document. An irrevocable trust may be used in Medicaid planning, gift planning or setting up a trust for individuals for special needs or minors. An irrevocable life insurance trust may be used to minimize the federal estate tax implications on insurance proceeds received upon the death of the grantor.
The more common trust is a revocable trust. This type of trust can be altered by the grantor or revoked at any time. The grantor still retains full control over those assets placed into the trust. A revocable trust allows those assets placed into the trust to avoid the probate process upon the death of the grantor. Those probate assets not placed into the trust must go through the probate process unless they have joint and survivorship co-owners or payable or transfer on death beneficiary designations appointed. A trust may or may not be appropriate for this reason depending on who the intended beneficiaries are. Certain trusts, often referred to as “A-B” or “marital” trusts, can be used by married couples with large estates to minimize their federal estate tax liabilities. Trusts can also be used to provide for minor beneficiaries, allow for payments to be made to a beneficiary after the grantor’s death over a period of time or be designated for specific purposes, such as education expenses of a grandchild. A trust may also be set up for a beloved pet or for specific purposes to a charity.
A trust can be either an inter vivos trust or a testamentary trust. An inter vivos trust is executed and funded during the grantor’s lifetime. A testamentary trust is a trust that is incorporated into an individual’s Last Will and Testament and becomes effective upon the death of the grantor. A testamentary trust within a will does not need to be funded during the life of the grantor, while an inter vivos trust should be funded immediately upon execution.
A client’s goals and needs, as well as the client’s financial and family situation, must be considered in order to determine what, if any, type of trust might be appropriate for him or her. At Holzfaster, Cecil, McKnight & Mues we can help you with this process and your estate planning options! Attorney Joseph E. Balmer is one of only 20 area lawyers certified by The Ohio State Bar Association as a specialist in estate planning, trusts and probate administration. Click here to read his biography page. Please don’t hesitate to call us at (937) 293-2141 or email us by using our form if you want to discuss any trust related issues. Additionally, we have an emergency phone number, (937) 760-4357, that is answered by one of our lawyers around-the-clock.
