Ten Common Types of Trusts Explained

Considering the many types of trusts available, creating an estate plan that works can seem daunting.  However, that’s where estate planning attorneys come in. We study the laws so that we can design a plan which addresses your specific situation. 

Here’s a look at the basics of ten common trusts to provide a general understanding. Don’t worry, there will not be a quiz at the end. All you need to do when we meet is share your goals and insight into your family and financial situation. We’ll design a plan that incorporates the best documents for your situation.

1. Bypass Trusts. Commonly referred to as Credit Shelter Trust, Family Trust, or B Trust, Bypass Trusts do just that: bypass the surviving spouse’s estate to take advantage of tax exclusions and provide asset protection. 
2. Charitable Lead Trusts. CLTs are split interest trusts which provide a stream of income to a charity of your choice for a period of years or a lifetime. Whatever’s left goes to you or your loved ones.
3. Charitable Remainder Trusts. CRTs are split interest trusts which provide a stream of income to you for a period of years or a lifetime and the remainder goes to the charity of your choice. 
4. Special Needs Trusts. SNTs allow you to benefit someone with special needs without disqualifying them for governmental benefits. Federal laws allow special needs beneficiaries to obtain benefits from a carefully crafted trust without defeating eligibility for government benefits.
5. Generation-Skipping Trusts.  GST Trusts allow you to distribute your assets to your grandchildren, or even to later generations, without paying the generation-skipping tax.
6. Grantor Retained Annuity Trusts. GRATs are irrevocable trusts which are used to make large financial gifts to family members while limiting estate and gift taxes.
7. Irrevocable Life Insurance Trusts. ILITs are designed to exclude life insurance proceeds from the deceased’s estate for tax purposes. However, proceeds are still available to provide liquidity to pay taxes, equalize inheritances, fund buy-sell agreements, or provide an inheritance.
8. Marital Trusts. Marital Trusts are designed to provide financial benefits to a surviving spouse and to qualify for the unlimited marital deduction for estate tax purposes. Trust assets are included in his or her estate for tax purposes.
9. Qualified Terminable Interest Property Trusts.  QTIPs initially provide income to a surviving spouse and, upon his or her death, the remaining assets are distributed to other named beneficiaries. These are commonly used in second marriage situations and to maximize estate and generation-skipping tax exemptions and tax planning flexibility.
10. Testamentary Trusts. Testamentary Trusts are created in a will. These trusts are created upon an individual’s death and are commonly used when a beneficiary is too young, has medical or drug issues, or may be a spendthrift. Trusts also provide asset protection from lawsuits brought against the beneficiary.

There are many types of trusts available. We’ll help you select which trusts, if any, are a good fit for you. Call today to schedule a free initial consultation with a top-rated estate planning attorney in Minnesota today.

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Zach Wiegand is a Minnesota estate planning attorney and the owner of Gold Leaf Estate Planning, LLC. Gold Leaf Estate Planning is an estate planning law firm that also handles probate and trust administration in Minnesota. We serve the Twin Cities metropolitan area with a focus on estate planning for clients in Burnsville, Eagan, Savage, Prior Lake, Lakeville, Apple Valley, Eden Prairie and the South Metro as well as clients in Woodbury, Lake Elmo, Maplewood, Oakdale, St. Paul and the East Metro. Our firm has offices in both Burnsville and Woodbury (Lake Elmo). The firm also handles probate in Dakota County, Washington County, Scott County, Hennepin County, and Ramsey County and most other counties in the Twin Cities Metro area. Zach has been named a Minnesota Super Lawyer – Rising Star for 2017, 2018, and 2019, and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337 and in Woodbury/Lake Elmo at 8653 Eagle Point.