Personal Finance
Personal Finance
Types of Trusts

There are several different types of trusts that you can create.

  • Testamentary Trust - A trust in your will
  • Living Trust - A trust during your life
  • Revocable Trust - A trust you can change or cancel
  • Irrevocable Trust - A trust you cannot change or cancel

Testamentary Trust

A testamentary trust is one that is created and funded under the terms of your will. It does not come into existence until your death. Assets that are transferred to the trust must pass through probate. Until your death, you can change the terms of the trust by amending your will. Upon your death, the trust becomes irrevocable. A testamentary trust can be contingent. That means that it will be created upon your death only if certain conditions are present (e.g., your children are under a certain age).

Living Trust

A living trust, also called an inter vivos trust, is created while you are living. A living trust can either end or continue at your death. Property in the trust is distributed according to the terms of the trust, not your will. Living trust assets avoid probate.

Irrevocable Trust

As the name implies, an irrevocable trust is one that you cannot change or cancel once the trust has been established. This means that you cannot dissolve the trust, modify the beneficiaries, remove assets from the trust, or change the terms of the trust. The main advantage to setting up an irrevocable trust is that the assets in the trust, including any future appreciation, are not included in your gross estate for estate tax purposes. The transfer to an irrevocable trust may be a taxable gift, and gift taxes may have to be paid at the time of the transfer. A secondary benefit of an irrevocable trust may be that the assets in the trust are beyond the reach of your creditors. Irrevocable trusts are used primarily as estate planning tools. With careful planning, you may be able to save substantial amounts in estate taxes.

There are many different types of irrevocable trusts that can be set up.

  • Irrevocable Life Insurance trust - Holds an insurance policy
  • Qualified Personal Residence trust - Holds a personal residence
  • Grantor Retained Annuity Trust - Provides income

Revocable Trust

Again, as the name implies, you can change or cancel the terms of a revocable trust. You can modify the beneficiaries or trustee. You can add or remove assets from the trust. You can also change the provisions of the trust. You can even dissolve the trust. Furthermore, at your death, the assets in the revocable trust do not pass by the terms your will (and thus do not pass through probate). Instead, the assets in a revocable trust are distributed in accordance with the terms of the trust. In fact, many people set up a revocable living trust simply to avoid the delay and cost of probate. However, one big disadvantage to a revocable trust is that the assets in trust will be included in your gross estate for estate tax purposes. Thus, a revocable trust is not used to avoid estate taxes.

A revocable trust may become an irrevocable trust at the death of the grantor, unless the grantor gives someone else the power to amend the trust. The spouse of the decedent, for example, cannot change the terms of the trust unless he or she is given a special power of appointment.


For More Information

To learn more about PNC Trusts, contact us at 888-762-6226 7:00 a.m. to 10:00 p.m., ET, Monday through Friday and 8:00 a.m. to 5:00 p.m., ET, Saturday and Sunday to speak with a Wealth Management representative.


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