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There are two main types of trust that an individual may choose from when creating an estate plan. The first type of trust is referred to as a living trust, and its terms may take effect while a person is still alive. Alternatively, a testamentary trust may be established, which is part of a will and takes effect after an individual passes on.
A trust may be either a revocable trust or an irrevocable trust. Revocable trusts can be changed at any time, and the person who creates the trust can change its terms. The irrevocable trust hands control of assets within a trust into the hands of a trustee. The terms of an irrevocable trust may only be changed if the beneficiaries and the trustee agree to do so.
However, one of the benefits of an irrevocable trust is that the assets inside of the trust can appreciate without incurring estate taxes. Those who are interested in customized estate planning may choose from a variety of niche trusts that may also suit their needs. For instance, a credit shelter trust may be established to reduce estate taxes both now and in the future. This is done by leaving an amount equal to the estate tax exemption to a spouse and leaving the rest in the trust.
Those who are looking to create a trust may be able to do so with the help of an estate planning attorney. Although an attorney is not needed to create the document, it may be necessary to have an attorney notarize and review trusts to ensure that they adhere to state law. If the trust does not, assets may be considered part of the estate, which may expose it to probate and increase an estate’s tax bill.