You may need to understand a basic description about the distinct types of trusts and how these could be used in the estate plan for a Pennsylvania residence. There are many different types of trusts available, some of which may be more specific and not aligned with your individual needs, and others that can be simply explained to you by a trust lawyer in Pennsylvania. With so many different kinds of estate tools, like a will, you need to know what you can use for each purpose.
A trust attorney in Pennsylvania is an advocate for you as well as someone who can answer many of your most common questions you have surrounding the establishment of a trust. If you do not have a Pennsylvania trust attorney to help you to draft these crucial documents, critical mistakes could be made that could limit the applicability of these estate planning tools.
One common mistake, for example, is failing to fund assets properly into the trust. First of all, in general, a trust is a relationship that is generated by one person in which an asset is managed by another party known as the trustee. Those assets are managed by the trustee for the advantage of a third person known as the beneficiary.
What follows are several of the most common types of trusts that can be used in the state of Pennsylvania. These include:
- A charitable trust which is designed to benefit a charitable beneficiary.
- A bypass trust is for a married spouse to maximize use of the unified credits in the federal estate tax. In certain cases, this may be referred to as a credit shelter trust.
- Charitable lead trust, which is a trust that contains non-charitable and charitable beneficiaries in which the charity gets an income benefit and non-charitable beneficiary gets the remaining interest later.
- Charitable remainder trust. A charitable beneficiary will receive the remainder interest after the non-charitable beneficiary receives the income interest.
- Grantor trust. This is an estate planning strategy in which the trust's grantor is established as the owner of the trust for reasons to do with the federal income tax.
- Irrevocable trust, which is trust document that cannot be revoked or changed after it is established and this is most frequently used to move assets for future tax avoidance.
- Living trust, which is established by someone during the course of his or her lifetime and might also be referred to as a revocable trust.
- Irrevocable life insurance trust, which is a trust that is set up to own one-on-one life insurance policies and accepts the proceeds for most policies at the death of the insured person. This type of trust may not be revoked or changed after it is established.
- A special needs trust, used to provide for a disabled person.
- Marital trust is for the benefit of the remaining spouse and frequently contains provisions that permit the property and the trust to go to a surviving spouse or for the benefit of a surviving spouse in the future.
- Residuary trust, which is a trust designed to give away the residue of the estate.
- Revocable trust, which is an estate planning strategy that can be revoked or changed typically at any time.
- Testamentary trust, which is one that is created in a will and only becomes effective on the death of the testator.
- Stand-by trust is trust that is established to be used if one or more conditions occur in the future. The support of a lawyer can be helpful for establishing information surrounding this. During your sit-down consultation, discuss how the different types of tools can be used to accomplish your goals.