Are you considering creating a trust? There’s a lot that goes into drafting and funding a trust. As a trust grantor, you will need to understand how the law governs trusts. You need to determine who the beneficiaries of the trust will be, what resources you want to put in the trust and much more. Let’s take a look at the different types of irrevocable trusts available for you to create in your trust.
There are two types of irrevocable trusts available today — living trusts and testamentary trusts. A living trust is created and funded by someone during their lifetime. It is also known as an inter vivos trust.
A testamentary trust is created and then funded after a person has died, which makes it irrevocable at all times. A testamentary trust is created based on the wishes outlined by the deceased person’s will and other estate documents.
Another type of trust, known as the irrevocable life insurance trust (ILIT), is a form of living trust created for beneficiaries to accept death benefits when you die so the value of those benefits can be included in your estate. An ILIT can be funded with an annual gift of $15,000 without being charged the gift tax.
Other trusts, such as the charitable remainder trusts, can be created as well. These trusts distribute some of your assets to your beneficiaries and the remainder to a charity of your choice.
If you are ready to create a trust for your family, it’s time for you to speak to an experienced estate planning attorney about your situation. Don’t make mistakes others have made when creating a trust by trying your luck at it on your own.