With so many different types of trusts out there, each with it’s own purpose, it’s easy to become overwhelmed. Regardless of what the trust is called, each and every one of them has the same, somewhat simple concept behind it – an arrangement whereby one person agrees to hold property for the benefit of another.
Determining which type of trust is most appropriate for a specific situation is best left to qualified estate planning attorneys. That being said, we understand that the confusion brought about by all the legal jargon surrounding trusts is often a factor in delaying that first conversation with the very attorney who can help. For that reason, we’re providing you with the basic purpose behind some of the most common types of trusts used today.
The surviving spouse’s portion of an A-B trust. Also called marital trust or survivor’s trust.
A trust that includes a tax-planning provision that lets you provide for your surviving spouse and keep control over who will receive your assets after your spouse dies. It also lets both spouses use their federal estate tax exemptions. This can save a substantial amount in estate taxes and leave more money for your beneficiaries.
The deceased spouse’s portion of an A-B trust. Also called credit shelter or bypass trust.
Certificate of Trust
A shortened version of a trust that verifies the trust’s existence, explains the powers given to the trustee, and identifies the successor trustee(s). It does not reveal any information about the trust assets, beneficiaries, or their inheritances.
A trust included in your living trust. If, when you die, a beneficiary is not of legal age, the child’s inheritance will go into this trust. The inheritance will be managed by the trustee you have named until the child reaches the age at which you want him/her to inherit their portion of your estate.
One living trust established by two or more individuals (usually a married couple).
Credit Shelter Trust
Another name for the B Trust in an A-B living trust because this trust “shelters” or preserves the federal estate tax “credit” of the deceased spouse.
A trust that cannot be changed (revoked) or cancelled once it is set up. Opposite of revocable trust.
Often used for privacy. Title is transferred to a corporate trustee or corporation, but you keep control over how the property is managed. Because the title is in the name of the corporate trustee or corporation, no one knows the property belongs to you. In all financial transactions and dealings, your personal name never comes up. Also called a title holding trust.
A written legal document that creates an entity to which you transfer ownership of your assets. Contains your instructions for managing your assets during your lifetime and for their distribution upon your incapacity or death. Avoids probate at death and court control of assets at incapacity. Also called a revocable inter vivos trust. This trust is created during one’s lifetime.
Qualified Domestic Trust (QDOT)
Allows a non-citizen spouse to qualify for the marital deduction.
Qualified Terminable Interest Property Trust (QTIP)
A trust that delays estate taxes until your surviving spouse dies so more income will be available to provide for your spouse during his/her lifetime. You can also keep control over who will receive these assets after your spouse dies. Sometimes referred to as a C Trust.
Qualifying Subchapter S Trust (QSST)
Trust that meets certain IRS qualifications and is allowed to own Subchapter S stock.
A trust in which the person setting it up retains the power to change (revoke) or cancel the trust during his/her lifetime. Opposite of irrevocable trust.
A trust established by one person. A married couple has separate trusts if each spouse has his/her own trust with its own assets.
Special Needs Trust
Allows you to provide for a disabled loved one without interfering with government benefits.
A trust in a will. Can only go into effect at death. Does not avoid probate.
A “pay-on-death” account. A bank account that will transfer to the beneficiary who was named when the account was established. The terms “transfer on death” (“TOD”), “in trust for” (“ITF”), “as trustee for” (“ATF”), and “pay on death” (“POD”) often appear in the title.
About Oakstone Law, PL
Oakstone Law PL was founded by Bob Kleinknecht. A member of the Florida Family Trust Company Subcommittee, the Estate Tax & Trust Planning (ETTP) Committee and the Real Property, Probate & Trust Law (RPPTL) Section of the Florida Bar, Kleinknecht has 15 years’ experience.
Prior to founding Oakstone law, he spent more than eight years serving as a personal, in-house estate, tax and charitable planning attorney for a Forbes 400 family in New York and Florida. Before that he was an estate planning and estate settlement attorney with prominent firms in Boston and Washington, D.C. after beginning his career with a boutique firm in Naples, Florida.
Licensed in Florida and Massachusetts, Kleinknecht has developed a practice model that eliminates billing by the hour and offers a streamlined, customized client process supported by technology, security and a personal approach.