UNDERSTANDING DIFFERENT TYPES OF TRUSTS
Florida residents have many choices when it comes to estate planning. Depending on their situation, people may want to choose to create a trust. A trust is created by a person and it can survive the person's death. A trustee manages the trust to the benefit of named beneficiaries. The trustmaker names the beneficiaries and picks the trustee. While these basic facts may be well understood, Florida residents may not understand all the different type of trusts that are available to choose from.
There are two main types of trusts -- irrevocable trusts and revocable trusts. Irrevocable trusts are trusts that cannot be changed once they are created. This means that not even the creator of the trust can alter, modify or revoke the trust after it has been created. If property has been placed into an irrevocable trust, therefore, it cannot be removed.
On the other hand there are revocable trusts. In a revocable trust, the creator of the trust has the power to change, revoke or modify the trust during that person's lifetime. This also includes the ability to remove property from the trust. However, these types of trusts are not completely safe from creditors as a result.
While irrevocable and revocable trusts are the most common distinctions, there are many other types of trusts. Charitable trusts, for example, are trusts created specifically to allow a person to donate to charitable causes. These trusts often help an estate avoid certain taxes.
People can also create special needs trusts to benefit a person receiving government assistance because of a disability. This trust ensures that the person with special needs can receive benefits from the trust without altering the person's eligibility for certain governmental programs.
Other types of trusts can include an asset protection trust, a tax by-pass trust or a spend thrift trusts -- which place which protects assets from a beneficiary's creditors.
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On behalf of J. Kelly Kennedy, Attorney/CPA, PLLC, which has been acquired by Rignanese & Associates, PLLC.
Source: Findlaw.com, "Types of Trusts," accessed Oct. 27, 2014