Many people do not realize that there are several different kinds of trusts that can be established. Here are a few of them:

Testamentary Trusts

The most common trust established in wills is to hold assets for minor children. In this type of trust the assets are held and paid out as needed for the care of the child or children. The trust will terminate at some point in the future when a specified event occurs, usually a child reaching a certain age.

Another common trust is a marital deduction trust used as a tax savings tool in larger estates. If this type of trust is to be part of your will you need to make certain you understand the reason for the trust. The Internal Revenue Code is complicated and the language of these trusts can be very confusing. The attorney must understand the tax law and its impact on your estate. Tax savings may be a secondary issue in your estate plan.

In some cases a special needs trust may be created to protect a handicapped child or other beneficiary. These trusts require careful planning to avoid the potential of causing the beneficiary to lose rights to government programs. Careful consideration must be given to both State and Federal law and regulations. An attorney who handles this type of trust must be well versed in the regulations governing entitlements to those with special needs.

A trust can also be used to control a beneficiary's access to assets where waste is a concern. Also, trusts can extend far into the future, well beyond the life of the initial beneficiary.

Irrevocable Trusts

Trusts which are irrevocable are most commonly used to plan for tax savings or to control access to assets for a spouse or children over a long period of time. The trust instrument generally permits the trustee to exercise broad discretion in managing the assets.

The settlor (creator) of an irrevocable trust transfers assets to the trust. Sometimes life insurance policies are part of the trust corpus. Once conveyed to the trust the settlor is generally required to give up any interest or control over the asset. the trust becomes its own individual with its own taxpayer identification number.

Revocable or Living Trusts

This type of trust differs from an irrevocable trust in that the settlor can change their mind and terminate the trust. They can also be effective tax planning tools but the tax advantages do not generally come into play until after the death of the settlor.

Living trusts have been highly publicized in recent months. National magazines carry ads about them, attorneys hold seminars encouraging people to have a living trust rather than a will. There are several advantages claimed for a living trust:

     - Avoid probate and probate costs.

     - No requirement for a judge to approve your estate plan.

     - No delay in court time for the probate process.

     - Wills are recorded and become public records. Anyone can look at what
       you have.

Although these documents have their place, and there are some valid reasons to consider a living trust, they may be several times more expensive than a will. For the majority of average folk, a living trust is not the preferred estate planning tool. Remember, when someone is pitching something, they usually stand to gain financially. do your homework before proceeding.