There are many different types of trusts that may be used for different goals.  Before we cover the main 3 types of trusts, it’s important to cover some basic terminology that is used in any type of trust:Estate Planning Pitfalls

  • A Trust is a contract between a Trustmaker, a Trustee, and the Beneficiaries.
  • The Trustmaker (also sometimes referred to as the grantor, donor, or settlor) is the person who creates the trust instructions and transfers property to the trust.
  • The Trustee is the person who administers the trust according to the instructions provided in the trust document. 
  • The Beneficiary is the person or entity who benefits from or will benefit from, the Trust.

There may be more than one Trustmaker, Trustee, or Beneficiary of a Trust and the same individual may serve in more than one role. For example, the Trustmaker may also appoint himself or herself as the initial Trustee of the Trust.

Trusts can be used for a variety of purposes, such as:

Trusts are not one-size-fits-all. Trusts must be customized to carry out the individual Trustmaker’s wishes. The type of trust that is best suited for you will depend upon your personal planning goals. 

   1. Testamentary Trust

The term “Testamentary Trust” is generally used to refer to a Trust that is written into a Will and does not take effect until after the Trustmaker dies. For example, if you have minor children, you might specify in your will that if your children are still below age 25 when you die, the assets of your estate should be held in trust for your children. You can amend or revoke a Testamentary Trust by changing your Will. However, after your death, a Testamentary Trust usually becomes irrevocable (see below).

Our Heir Safeguard Testamentary Trusts are a popular tool for leaving assets to beneficiaries protected from future lawsuits, creditors, or divorce.

   2. Revocable Living Trust

A Living Trust is a Trust established by the Trustmaker that becomes effective while the Trustmaker is living. A Revocable Living Trust is a Living Trust in which the Trustmaker has retained the power to modify or revoke the Trust at any time. This means that if the Trustmaker originally included a beneficiary they now want to remove, they have the power to do that.

Revocable Living Trusts are a common estate planning tool for avoiding probate.  A Revocable Living Trust may also provide several other benefits, such as leaving things to your beneficiaries protected in the event that your spouse remarries or protecting your beneficiaries from future lawsuits, creditors, or divorce.

   3. Irrevocable Trust

Many people think that an Irrevocable Trust is a trust that cannot be changed or modified, but this is wrong. An Irrevocable Trust is a trust that contains at least one provision that the Trustmaker does not have the power to modify by himself. It’s possible that the Trustmaker may have retained several powers, including the possibility to change the beneficiaries. However, the Irrevocable Trust must have been properly drafted to allow for a change in beneficiaries.

As stated above, a Testamentary Trust generally becomes irrevocable after the Trustmaker’s death. In certain circumstances, an Irrevocable Trust may still be modified by court order or by following specific provisions under the Uniform Trust Code. Such irrevocable trusts are a popular tool for leaving assets to a beneficiary protected from financial immaturity or irresponsibility or future lawsuits, creditors, or divorce.

An Irrevocable Living Trust refers to an Irrevocable Trust created while the Trustmaker is living. The most common reasons for using an Irrevocable Living Trust include asset protection and tax planning.

Want to Learn More About Wills & Trusts?

Feeling overwhelmed trying to sort out your options? Many of our clients have told us that they felt overwhelmed when they first began planning, but with our help, they were able to make sense of the options and select a plan that fit their goals. We've empowered thousands of Wake County-area residents to take control of their future with their estate planning and long-term care planning solutions.

To get started, register for one of our upcoming seminars, download our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family’s Future, or call us at 919-443-3035


Wills & Trusts-Foundations:

What Happens If I Die Without a Will?

What Is a Will?

Why a "Simple Will" May Not Be Enough

What Is a Revocable Living Trust?

What Are Some of the Benefits of a Revocable Living Trust?

Do I Need a Will or a Revocable Living Trust?

What's the Difference Between a Testamentary Trust, a Revocable Living Trust, and an Irrevocable Living Trust?

Should Your Children Have an Heir Safeguard Trust?


Wills & Trusts-Intermediate:

A Guide to Different Trust Types

Trustee Selection: Individual vs. Bank or Corporate Trustee

Questions to Ask a Bank or Corporate Trustee

Does a Revocable Living Trust Protect My Assets from Lawsuits or Bankruptcy?

Will You Accidentally Disinherit Your Children?

Jackie Bedard
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Attorney, Author, and Founder of Carolina Family Estate Planning