Irrevocable Trust

Revocable Trust

A trust that can be modified, amended, or completely revoked by the person who created it (the grantor) during their lifetime. Also known as a living trust, it allows the grantor to maintain full control over the assets while alive and provides for a smooth transfer of assets upon death without going through probate. Because the grantor retains control, the assets in a revocable trust are still considered part of their taxable estate.

Trust

A legal arrangement in which one party, called the trustee, holds and manages assets on behalf of another party, known as the beneficiary. Trusts can be used to control how and when your assets are distributed, potentially reduce estate taxes, and avoid the probate process. There are many types of trusts, each designed to address specific financial and estate planning goals.

Estate Tax

A federal or state tax imposed on the transfer of a deceased person's assets to their heirs, calculated based on the total value of the estate above a certain exemption threshold. As of recent years, the federal estate tax exemption is quite high, meaning most estates do not owe federal estate tax, though some states impose their own estate taxes with lower thresholds. Proper estate planning using trusts and other strategies can help reduce or eliminate estate tax liability.

Bypass Trust

A trust commonly used in estate planning for married couples that allows the first spouse to die to pass assets up to the estate tax exemption amount into a trust for the benefit of the surviving spouse, while keeping those assets out of the surviving spouse's taxable estate. Also known as a credit shelter trust or family trust, it effectively doubles the amount of wealth that can pass to heirs free of estate tax. The surviving spouse can typically receive income and principal from the trust during their lifetime.