What types of Living Trusts are there?

There are many types of Living Trusts, and each is uniquely customized for specific needs and goals in estate planning. The common ones include revocable Living Trusts, Irrevocable Living Trusts, and specialized Living Trusts. In each category, different aspects apply to influence the management and distribution of assets.

1. Revocable Living Trust: This is the most commonly used type of Living Trust. It allows the grantor to retain control of the assets in the trust, making changes or even revoking the trust during his lifetime. This flexibility makes it highly attractive to many individuals. Upon the death of the grantor, all the assets go directly to the beneficiaries without needing to go through probate, which could save time and fees. However, as the grantor had retained control, for tax purposes, the assets remained in the estate of the grantor.
2. Irrevocable Living Trust: Unlike the revocable trust, an Irrevocable Living Trust may not be amended or revoked subsequent to its execution. Once the assets are placed in the trust, the grantor gives up any control and ownership of the said assets. For example, this type of trust provides some advantages in asset protection from creditors and some favourable provisions in taxation. Since, in effect, the grantor no longer owns the assets, the assets may not be subject to estate taxes, which can be very high for large estates.
3. Specialized Living Trusts:
   • Charitable Remainder Trust: Under this trust, the grantor is able to provide for the naming of a charity in such a manner that the grantor creates income for himself from the assets donated during his lifetime. Upon the death of the grantor, the remaining assets will be transferred to the named charity.
   • Special Needs Trust: The goal of this trust is to benefit an individual with one or more disabilities without impacting their qualification for governmental assistance programs, such as Medicaid or Supplemental Security Income (SSI).
   • Bypass Trust: This type of trust enables married couples to maximize estate tax exemption. It is also referred to as a credit shelter trust. It allows property to bypass the estate and flow to the beneficiaries free of estate taxes.

Each of these different types of Living Trusts will serve a different purpose, depending on the grantor's objectives, such as asset protection, tax savings, or providing for a loved one with special needs. It is best to seek out an estate planning professional to help determine what type of Living Trust would work best.