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A trust is a legal document that allows you to reduce unnecessary legal fees, save taxes, and keep control over your assets while you are living, if you become physically or mentally incapacitated, and after you die. There are many different types of trusts, each designed for a specific purpose.

Revocable Trust

Also known as a "living trust," a revocable trust is one that is created during the lifetime of the person creating the trust. It can be changed, amended or revoked at any time by the creator, also known as a grantor or trustor. The grantor retains complete control over the trust assets, even if he or she names a third party as trustee. The grantor retains the right to change or terminate the trust.

Advantages:

• Flexible - can be changed at any time and allows use of assets by grantor during grantor's life.
• Durable - allows assets to be managed in the event the grantor becomes disabled or incapacitated.
• Control - allows grantor to choose who will manage assets, not the courts or a sometimes improperly motivated family member.
• Private - trust administered and assets distributed, even after death, in a private setting, not in public probate proceedings.
• Avoids Probate - possible cost savings and reduction in delays of distributing assets.

Many times, prudent trust drafting includes the naming of a bank as either a co-trustee or successor trustee to administer the trust and manage assets during periods of the grantor's incapacity or after the grantor's death.

Irrevocable Trust

An irrevocable trust is one that, once created and funded, cannot be changed, amended, revoked or cancelled by the creator. The grantor transfers legal title of the property to the trustee, who is responsible for administering that property for the benefit of the trust's beneficiaries.

Advantages:

• Income Taxes - often created to limit or shift income tax burdens created by income or capital gain.
• Estate Taxes - allows appreciated value property to transfer to beneficiaries without, or at lower, estate tax.
• Control - permits grantor to control use and distribution of income and principal even after death.

Tax laws place significant restrictions on what a trustee can do if he or she is also a beneficiary or potential beneficiary of an irrevocable trust. As a result, the use of a bank as trustee permits a grantor to continue to receive certain benefits of the trust property while still obtaining the tax advantages for which the trust was created.

Charitable Trust

Many people wish to make gifts of money or property to a charitable organization. Charitable trusts use a form of irrevocable trust as the vehicle by which to make their charitable gifts.

Advantages:

• Resolves Uncertainty - allows grantor to defer the gift to charity until after death while grantor continues to receive income from the property.
• Income Tax Savings - obtain immediate federal income tax deduction for part of current value of gift while avoiding long-term capital gains for appreciated property.
• Estate Tax Savings - qualifies for estate and gift tax deductions.

Life Insurance Trust

A life insurance trust is a special type of irrevocable trust designed to own life insurance policies on the life(s) of the grantor(s).

Advantages:

• Estate Tax Savings - allows sizable life insurance death benefits to be distributed to beneficiaries free of estate tax.
• Gift Tax Exemption - can often be funded with gifts that fall within annual gift tax exclusion amount.
• Estate Consolidation - life insurance trust can become the receptacle into which other assets are transferred upon grantor's death.

The estate tax savings may only be achieved if ownership of the life insurance policy is separate from the person whose life is being insured. A bank is the ideal trustee for this purpose, since administration of the trust requires regular monitoring and documentation. In addition, an experienced bank trustee will know what types of documentation must be created to achieve the tax benefits of the life insurance trust.

Burial Trust

A burial trust is a type of irrevocable trust created to pay for the grantor's funeral services after death.

Advantages:

• Lower Net Worth - allows grantor to transfer assets into trust and lower net worth to qualify for government assistance.
• Peace of Mind - ensures sufficient funds set aside to pay for funeral expenses.