Types Of Trusts

Technically speaking though, an irrevocable trust could be modified but only with unanimous consent of the beneficiaries, and possibly causing tax implications to the grantor. This is the only exception, and it’s rarely ever done. Getting beneficiaries to 

agree on reverting assets that were once given to them is a very rare thing that almost never happens. So, when you think of an irrevocable trust, remember that it’s something that never changes, where as a living trust could change.Nevertheless, living trusts basically only have one benefit. They help assets bypass probate and pass on to someone without having to go through the hands of a Probate Court. That is basically the only benefit of a living trust. The only other benefit of a living trust is that some living trusts enjoy some degree of anonymity, depending on if the grantor uses a name not associated with him or his or her family. Living trusts get no tax advantages or asset protection. Remember that. In fact, there are times when judges even rule that assets placed in a living trusts were put there under an unaccepted practice called Alter Ego, and therefore creditors are able to gain access to assets in living trusts. This is why we say there is no asset protection. And, from a financial planning standpoint, a good financial planner who understands estate planning will usually not recommend a living trust in a comprehensive financial plan. There are simply too many downsides.

Therefore, from a definition standpoint, financial planners will not view irrevocable trusts as living trusts, even though the grantor is still alive. Technically speaking, we consider all irrevocable trusts to be in a separate category from living trusts. We like to say they are opposite from living trusts, because the assets inside them can never revert back into the name of the grantor without invalidating the entire trust. Therefore, in summary, a revocable trust can be changed, and an irrevocable trust cannot. But there is something much more important about trusts than who owns what, when you are looking to set up a trust. We like our clients to think bigger than getting a living trust, and just avoiding probate. This is why good financial planners need to steer clear of living trusts when helping manage assets for their clients. Way more important than the title of the assets or avoiding probate is that a trust, properly constructed, can provide bullet-proof asset protection and unbelievable tax benefits. Providing clients with these two massively important benefits is what separates financial planners from professional financial planners. Professional financial planners understand estate and trust planning. What good is it to help a client mangage and grow assets, when only one lawsuit can come along and take everything away from them?

Average financial planners think products and strategy. They consider a problem and think about a strategy or a product to fix or eliminate a problem. However, professional planners do not do this. Professional financial planners never consider a product or a strategy first to fix or eliminate a problem. Professional planners will first take a step back and look at the big picture. They don’t think products and strategy. They think planning and details. More important than a strategy is having a comprehensive plan that understands the details. The details are what make or break a strategy. Details are what comes back to bite you, defeating any strategy. In fact, a strategy is only as good as the details that make it work or not. Not considering details is what makes plans fail, and this is why professional financial planners are usually sought after when the outcome really matters. Super wealthy people don’t want strategy. They usually seek out professional planning. They can’t afford mistakes. They know a little price to pay on the front end of big decision or change can make all the difference in the world.

So, when looking for a trust, it’s important to know the different types and if they have financial planning value or not. We know that all trusts are either revocable or irrevocable. Next, let’s see other types and see what makes them valuable. Why You May Want A Professional Trustee It is difficult at best for one individual to possess all of the characteristics necessary to manage a trust. Our trust management professionals are trained and educated to fulfill the duties of a trustee and deliver responsive service to the client.

Some people say that there are only two types of trusts, living trusts and testamentary trusts. That’s because the one who created the trust is only one of two options: dead or alive. If the grantor is still alive then some say that it’s called a living trust. But technically, a testamentary trust is something that isn’t established at all, yet, until a judge rules that that it is established. A testamentary trust is simply the desire of someone who write in their will that I want this to happen… when I die. Therefore, from a financial planning standpoint, assets that are believed to be in a trust, through a testamentary designation in a will, that hasn’t even been established, are benefiting from absolutely nothing. And, many financial planners do not consider a testamentary trust to even be a type of trust, because technically speaking it hasn’t even been established. It’s something that may or may not happen. A testamentary trust, or will trust, is set up through a provision in a last will and testament. It’s used to appoint a trustee to manage and distribute your assets upon your death. This type of trust is completely antithetical to the entire purpose of a trust. It makes no sense in financial planning to ever set up a testamentary trust. Trusts are set up to do one thing: to give someone control from the grave. When people die, they want their assets either managed or distributed in a particular way. This is the true meaning and purpose for a trust. However, a testamentary trust is only initiated through a will, which requires a probate court to validate it.

However, most people who set up trusts don’t want probate courts involved at all. They expect the trust to operate on its own, nevermind being dragged into a probate court, letting the probate attorney rob it blind, and the worst part is that the assets are usually unmanaged for a period of time until a judge finally validates the trust. It’s the dumbest way on the planet to set up a trust.

Therefore, a testamentary trust isn’t something that exists at all, yet. When someone dies, then after the probate process determines the will’s authenticity, the appointed executor transfers the assets into the testamentary trust and the trust is created. It’s not an efficient way to transfer ownership or manage assets when someone dies.

This kind of Totten trust is revocable, and the beneficiary doesn’t have access to the accounts while the grantor are alive. In fact, most beneficiaries of this arrangement don’t even know that they’ve been named as a beneficiary. Only upon your death would the beneficiary have access to the funds. It’s the most effective way to manage assets without actually setting up a trust.