There are as many reasons for having trusts as there
are people in the world. A partial listing of the more commonly
used trusts, with brief description, follows:
Revocable Inter Vivos Trust:
Used most often for estate planning purposes to accommodate
the wishes or special circumstances of the grantor
Testamentary Trust: Various kinds
of trusts can be established under wills to assist in tax
planning, charitable giving and preservation of assets for
future generations of an individual's family.
Minors Trust: Trust receives
assets for a person under 21 years of age, generally for
use in education.
Generation-Skipping Trust: Used
to transfer assets to descendants, while reducing the estate
tax burdens of the family as a whole. Requires careful selection
of trustees.
Special Needs Trust: Established
with proceeds of legal settlement, or from other assets,
for the purpose of providing care for an individual who
qualifies for public benefits such as SSI or Medicaid. Establishing
and administering trust requires tailoring to specific circumstances.
Qualified Personal Residence Trust:
Used to transfer ownership of a personal residence to beneficiaries
selected by the grantor, while permitting the grantor to
live in the home for a specified term.
Irrevocable Life Insurance Trust:
Designed to remove life insurance proceeds from the taxable
estate of the insured. Difficult to administer, so trustee
is usually an institution with expertise in this area.
Charitable Remainder Unitrust:
Multiple benefits, including enhanced income stream to grantor,
charitable gift that is to varying degrees deductible for
income tax purposes; and ultimate charitable gift to entity
designated by grantor.
Charitable Remainder Annuity Trust:
Provisions parallel to Charitable Remainder Unitrust but
annual distributions are a fixed dollar amount.
Charitable Lead Unitrust: Trust
annually pays to a designated charity a percentage of the
value of the trust for a specified term of years. At the
end of the term, assets are transferred to family beneficiaries
selected by the grantor. Tax aspects are complex, and trustee
usually is an institution.
Charitable Lead Annuity Trust:
Provisions parallel to those of Charitable Lead Unitrust,
but annual distributions are a fixed dollar amount.
