Colorado residents who are new to the subject of estate planning may be interested to learn more about the various kinds of trusts that are available. Trusts fall into two general categories: testamentary and living trusts. A testamentary trust is set up only after the benefactor's death, when the person's will is put into effect. On the other hand, a living trust is established during the benefactor's lifetime.
There are two types of living trusts: irrevocable and revocable. An irrevocable trust is given to the beneficiary; therefore, the individual creating the trust will not be able to make changes to it without the beneficiary's consent in most cases. One benefit of an irrevocable trust is that the assets are not subject to estate taxes. For a revocable trust, the individual who creates them can change or revoke the trust's terms at any time. In addition, the individual will retain control over the trust's assets. Other less commonly used kinds of trusts include generation-skipping trusts, credit shelter trusts and irrevocable life insurance trusts.
Estate planning can be a complex process, particularly when an individual has multiple assets such as real estate, retirement accounts, stocks and other valuables. There are various tax codes and laws that can have a significant impact on the value of a trust or an asset. For instance, a trust may not be subject to an estate tax, but a similarly valued retirement account might be subject to an estate tax.
A lawyer with a background in estate planning could discuss an individual's goals and desires in regard to his or her assets and then review various estate planning options. Once an estate plan has been developed, the attorney may draw up the necessary paperwork and help to establish trusts.
Source: CNN Money, "What kinds of trusts are there?", December 07, 2014