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