What Is a Trust?

Revocable & Irrevocable Trust Ingalls Law

The term “Trust Fund” often evokes images of the Kennedys, Rockefellers, and Du Ponts sheltering their vast fortunes from the grasp of the government. However, in recent years, the trust has become a widely utilized tool by people at all income levels to take advantage of current legislation and provide enhanced protection for their families.

While a number of different types of trusts have sprung up over the years, the following are the among the most widely utilized today.

Revocable Living Trust

The most commonly utilized estate planning tool today is the revocable living trust. This widespread popularity is due to the ability to retain control of the assets contained in the trust, the ease and ability to modify the trust, the ability to benefit from the assets in the trust, and the ability to avoid probate. It’s like your wallet, you can put stuff in, you can take stuff out, you can even empty it and get a new one. The revocable living trust is just a wallet big enough to fit all your assets (even your house.)

Irrevocable Living Trust

If a revocable living trust is a wallet, think of the irrevocable trust as Fort Knox; it’s secure, but once the property is inside you can’t just reach in and grab it when you want it. When assets are placed in an irrevocable trust the creator of the trust loses ownership rights in the property and the right to modify or revoke the trust. The primary purpose of the irrevocable living trust was to minimize or eliminate the federal estate tax. Others reasons include insulating wealth from the high expense of medical care and protecting property from creditors.

Testamentary Trust

 A testamentary trust is created in a will and, unlike living trusts, does not formally exist until the death of the creator. Therefore, all assets to be included in the testamentary trust must first proceed, like a pour-over will, through the probate process.

Special Needs Trust

A special needs trust is a trust created for a person that is receiving benefits from the government. When a person is receiving governmental benefits, receiving an inheritance or other sum of money (a gift, damages stemming from a lawsuit, etc.) can lead to a termination or reduction in benefits. In order to maintain eligibility, a special needs trust is created to shelter the funds and provide for the person, while remaining eligible for benefits.

Pet Care Trust

A pet care trust is created to provide continued care for a pet. The trust can be used to provide assets as well as personalized instructions on how the pets should be cared for and who should provide the care. Pet care trusts can be particularly valuable if you own pets that may be strenuous and/or expensive to care for such as horses, exotic fish, or birds.

Spendthrift Trust

A spendthrift trust is often created for the benefit of a child or other beneficiary to protect the assets from ex-spouses, creditors, lawsuits, and/or the poor financial responsibility of the beneficiary. Keep in mind, spendthrift trusts are unlikely to protect the assets from child support orders or IRS liens.

Which Trust is Right For You?

The choice of a particular trust is a decision unique to every situation. The above list of trusts in not exhaustive and there are a number of alternatives that may be preferable depending on your current situation. Always speak with an experienced estate planning professional prior to making any decisions.

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Robert Ingalls

I am the founding member of Ingalls Law, PLLC. My practice focuses primarily on Civil Litigation, Personal Injury, and Workers' Compensation. I graduated from East Carolina University with a Bachelor of Science, and received my law degree three years later. I have been admitted to the North Carolina State Bar and the United States District Court for the Western District of North Carolina. I represent clients in the areas of Civil Litigation, Workers' Compensation, Employment Discrimination, and Personal Injury. I have also represented employees and employers in hundreds of unemployment benefits hearings throughout North Carolina. In addition to my law practice, I am an active member of the North Carolina Bar Association, Mecklenburg County Bar Association, American Bar Association, Delta Theta Phi Law Fraternity, and The North Carolina Advocates for Justice.