A trust is an estate planning arrangement in which an individual (the trustee) grants another party (the trustor) the right to manage specific assets for the benefit of the trustee's beneficiaries. It is created during the trustee's lifetime and, depending on the type of trust, the terms might be enacted immediately, at a certain point in the future, or upon the trustee's death. To better understand trusts, here are a few common types. 

An Introduction to the Different Types of Trusts

1. Living Trust

A living trust, also known as a revocable trust, is one in which the trustee transfers ownership of specific property to the trust itself, where it will be managed by the trustor. These arrangements are most often enacted while the trustee is still living. The trustee can change the terms of the trust at any time. The main benefit of a living trust is that the assets in it at the time of the trustee's death are not subject to the long and often costly probate process.

2. Irrevocable Trust

With an irrevocable trust, the terms of the agreement cannot be changed by anyone, even the trustee. Once ownership of property is in an irrevocable trust, it cannot be taken out again. This type of estate planning arrangement typically goes into effect at the time of the trustee's death. People choose irrevocable trusts because the assets in it do not change hands, so the estate taxes will be lower.

3. Testamentary Trust

A testamentary trust is enacted upon the death of the trustee. The trustee leaves directions in their will stipulating to their executor what assets should be transferred to the trust's ownership. The assets would then be managed by the appointed trustor until it reaches the expiration date set by the trustee, then the assets would go to the named beneficiary.

4. Special Needs Trust

A special needs trust allows parents or caregivers of a special needs child to make specific estate planning provisions for the beneficiary's care. Assets are placed in the ownership of the trust and do not affect the child's Social Security payments. The child cannot control or manage the trust after the death of the trustee.

When you’re ready to create a trust, contact Stuart R. Norman Jr. For over four decades, this estate planning attorney has been representing clients in New London County, CT. He handles both estate planning and real estate law cases. To schedule a consultation, call (860) 376-0069. Visit his website to learn more about his services.