What other irrevocable trusts are there?
There are many other kinds of irrevocable trusts, including the following:
- Investment or Gift trust
- Intentionally Defective Grantor Trusts (IDGT)
- Qualified Personal Residence Trusts (QPRT)
- Grantor Retained Annuity Trust (GRAT)
- Grantor Retained Unitrust (GRUT)
- Charitable Lead Annuity Trust (CLAT)
- Charitable Lead Unitrust (CLUT)
- Charitable Remainder Annuity Trust (CRAT)
- Charitable Remainder Unitrust (CRUT)
Investment or Gift trusts are just irrecovable trusts designed to hold assets other than life insurance. They are often Crummey trusts and are designed to get both the initial gift and the amount of growth over time of the gifted assets out of the settlor's estate, as well as provide asset protection to the beneficiaries.
An Intentionally Defective Grantor Trust is a trust that is effective as to estate taxes (meaning the transfer won't be included in your estate) but defective as to income tax (meaning the income of the trust is taxed to the creator of the trust). This means you can pay the taxes out of your personal money, allowing the assets in the trust to grow with a minimized tax burden.
A Qualified Personal Residence Trust (QPRT pronounced "cue-pert") is a trust planning device based around a high-value personal residence.
Grantor Retained Annuity Trusts and Grantor Retained Unitrusts (GRATs and GRUTs) are trusts designed to help transfer assets tax free to beneficiaries A GRAT typically has a fixed annuity, and a GRUT typically has a variable annuity payment. The Grantor places an amount of assets into the trust that will appreciate. The trust then makes annuity payments back to the Grantor for a certain amount of years. At the end of the GRAT/GRUT, any assets remaining are passed to the beneficiaries tax free. If the Grantor dies before the trust ends, then all the assets are included in the Grantor's estate and the beneficiaries get nothing.
The various charitable trusts differ in two main ways, whether they are "lead" or "remainder" trusts, and whether they make payments based on a fixed annuity "annuity" or on a variable annuity "Unitrust". Charitable lead trusts allow a donor to make a tax deductible gift, that pays an annuity stream to a charity for a term of years, and then the remainder beneficiaries (often the donor's children) receive the remaining assets. Charitable remainder trusts are the opposite; the beneficiaries receive the income for a term of years, and then the charity receives the leftover assets at the end of the term.