What are the three types of trust?

A trust is a legal entity for managing assets on behalf of beneficiaries, typically as part of an estate plan for controlled asset distribution after death.

How Trusts Work

• Established by a grantor who transfers assets into the trust.

• Managed by a trustee with a fiduciary duty to act in beneficiaries' best interests.

• Beneficiaries receive income from the trust after the grantor's death.

Primary Classes of Trusts

• Revocable Trusts / Living Trusts

  • Can be modified or dissolved during the grantor's lifetime.

  • Helps avoid probate, making estate administration faster and cheaper.

    Irrevocable Trusts

  • Cannot be modified after establishment; assets are inaccessible until terms are fulfilled.

  • Protects assets from estate taxes, creditors, and legal actions.

  • Includes spousal trusts, irrevocable life insurance trusts (ILITs), and special needs trusts.

    Testamentary Trusts

  • Effective upon the grantor's death, established through a will.

  • Often used for minor children or surviving spouses, providing flexibility and control despite going through probate.

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