Steve's Guide to Types of Trust (only for prompting further discussion)
A/B Trust
A type of trust usually created in a will that splits assets into part A for the kids and part B for the surviving spouse - used for larger estates to save estate taxes. Also called a Credit Shelter Trust.
Charitable Split Interest Trusts
A general term for a class of trusts in which something about the assets is split between a charity and a non charity; examples include Charitable Lead Trusts, Charitable Remainder Annuity Trusts, ...
Charitable Lead Trust
Assets are placed in a trust with annual earnings distributed to a charity with the principal eventually going to some non-charity beneficiary.
Complex Trusts
Those which are not simple - really! See technical definition of simple trusts.
Constructive Trust
Usually created by a court ruling to force a trust situation and related responsibility in a problem case where there was no formal trust document.
CRAT
A Charitable split interest trust where the Remainder goes to charity after an Annuity type income is paid for a period of time to the donor or someone designated by the donor.
Credit Shelter Trusts
Another name for an A/B trust, which is designed to shelter assets from estate taxes, by placing in part A the maximum amount relating to the unified Credit level.
Crummey Trusts
Named after Mr. Crummey who placed assets in trust to get them out of his estate, yet give only limited opportunity for young beneficiaries to squander them. The beneficiary generally has a 60 day or so window of opportunity to take the money. Thereafter the money is locked away in the trust. (There is a logical reason for the 60 day window.)
CRUT
A Charitable split interest trust where the Remainder goes to charity after an income, based on the value of certain units, is paid for a period of time to the donor or someone designated by the donor.
Dynasty Trusts
Trusts hopefully designed to hold money for the family forever, in contradiction to the general legal rule against perpetuities.
Generation Skipping Trust
A trust designed by grandparents to skip ownership of assets by their children, though giving them income, and eventually leaving ownership to the grandchildren. This skips the estate tax otherwise charged at the childrens death. (But there are additional tax law complications.)
Grantor Trusts
A generally simple class of trusts in which for tax purposes the assets are treated as if still owned by the grantors / donors to the trust; the donors keep paying the income tax and IRS 1041 and K-1 forms for the trust are not required.
GRIT
A grantor Retained Income Trust is a Grantor Trust where the grantor/donor places an asset in trust, but keeps the right to its income, usually for the grantor's life.
Informal Trust
A situation where there might not be a written trust, but a trust understanding still exists and legal responsibilities could well apply.
Intentionally Defective Grantor Trusts
Fairly arcane trusts which meet certain standards, yet intentionally fail others, to distribute tax liabilities in special ways.
Irrevocable Trust
Means that once the trust is established, it essentially cannot be canceled nor changed. This is desirable for estate tax planning; assets are really moved out of the estate.
Irrevocable Life Insurance Trust (ILIT)
An irrevocable trust, which owns, perhaps among other things, a life insurance policy. When the insured dies, the large death benefit payment is not counted as part of the estate for estate tax purposes (which is otherwise normally the case).
Living Trusts
A common term, almost slang, for a trust created while a person is still living, as opposed to one created later (testamentary trust) when his or her will is administered. In slang terminology, it suggests a magical technique to avoid probate and taxes; such trusts are frequently peddled to elderly people at seminars or over the phone. Properly written by an attorney, such trusts can be good, particularly when land is owned in several states or in anticipation of failing health. However, if poorly implemented, they can create administrative headaches and more, not less, expense than a probated will.
Medicaid Shelter Trusts
Medicaid is a medical welfare program for people who are poor, sometimes because of accident or nursing home costs. These trusts were designed to hold assets for such a person, yet let the person remain legally poor and continue to get government aid in the form of payments for nursing home care, etc. This technique has been viewed as a loophole, with continued moderately successful attempts to close it. See also Special Needs Trusts.
NIMCRUT
A CRUT charitable split trust (see above) with Net Income Make up provisions. Complicated, but possibly worthwhile for large charitable gifts.
Off Shore Trust
A trust which is created and administered on some island off shore and away from IRS tax collectors, such as the Isle of Wight off the shore of England or one of the islands in the Caribbean. Reportedly, large amounts of taxes can thus be hidden from U.S. authorities. We do not get involved in such dealings.
On Shore Trust
This is just a test to see if you are still reading this list; it's not a real term. But at a cocktail party you might mention you are thinking of establishing an on shore trust which I presume would be for those afraid of water.
Personal Residence Trust
This is a way to continue to live in the family home, transfer the ownership to a trust and lower its value for estate tax purposes. With new tax laws, for average net worth families it hardly seems worth the effort. However, with multi million dollar estates it remains a tool to consider.
Profit Sharing Trusts
This is an example of something outside the category of personal trusts - it is a trust to hold tax deferred retirement plan assets. We concentrate only on personal trusts.
QTIP Trusts
Qualified Terminable Interest Property trusts seem mostly used by people with children from a prior marriage. After your death, your spouse continues to get lifetime income from your old assets or use of certain property, after which it goes to your kids. Establishing this type of trust can clarify intentions and sometimes clear up unstated feelings of merged family members. His and Her QTIPs are not uncommon, each being used for old assets owned before the new marriage.
Real Estate Investment Trusts (REIT's)
These are also outside the realm of personal trusts; they are more like mutual funds that hold real estate for a large number of shareholders.
Revocable Trust
A trust in which the creator / grantor retains the right to revoke or change the trust. A very flexible feature, but one which allows the IRS to ignore the trust for tax purposes, mostly in relation to estate taxes.
Special Needs Trust
A very special form of Medicaid shelter trusts. Typically these carefully hold a large inheritance or lawsuit settlement and provide items that Medicaid cannot cover, such as a handicapped accessible home or special treatments. A variation for smaller amounts may be a plan operated in many states by a special charity. Such trusts are specifically allowed by law, but must include certain provisions. See separate section.
Spendthrift Trust
A trust with a special paragraph or two essentially stating that the trust will not necessarily pay any bills or lawsuit amounts incurred by the beneficiary nor can the beneficiary sell or assign any of the trust assets nor likely borrow against the trust.
Testamentary Trust
A trust created by ones Last Will and Testament. Generally easy to include in the will and to change while still alive and competent. Contrast with Living Trusts which typically become active while you are still alive.
Totten Trusts
A relatively informal trust, usually just a sentence or other indication on a bank account form. Now relatively rare and mostly replaced by alternatives such as UTMA and TOD registrations (mentioned elsewhere as trust alternatives).
PLEASE CONSULT YOUR ATTORNEY REGARDING ALL OF THE ABOVE CONCEPTS