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What other kinds of trusts are there?

As discussed above, living trusts enable you to put your assets in a trust while still alive. You can wear all the hats—donor, trustee, and beneficiary—or have someone else be trustee and have other beneficiaries.

There are many, many other kinds of trusts that serve the particular needs of their grantors. Here's a brief rundown of some of the most popular trusts. Your lawyer can help you decide if they're right for you and can help you set one up.

Support trusts direct the trustee to spend only as much income and principal as may be needed for the education, health care, and general support of the beneficiary.

Discretionary trusts permit the trustee to distribute income and principal among various beneficiaries as he or she sees fit.

Charitable trusts support a charitable purpose. Often, these trusts will make an annual gift to a worthy cause of your choosing.

Dynasty trusts (also sometimes called wealth trusts) can last for a number of generations, and sometimes can last forever. They can help those with great fortunes control the distribution of their wealth over a very long period.

Generation-skipping trusts are tax-saving trusts that benefit several generations of your descendants.

Insurance trusts are a device used to avoid or, at least, minimize federal and state estate taxes. Here, trust assets are used to buy a life insurance policy whose proceeds benefit the creator's beneficiaries.

Special needs trusts are for people with disabilities who want to keep their government benefits. Medicaid trusts are a particular kind of special needs trust. They help you qualify for federal Medicaid benefits. This device is mostly used when family members are concerned with paying the costs of nursing-home care.

American Bar Association Family Legal Guide
Copyright © 2004 American Bar Association

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