Estate Planning: A Guide to Trusts and Estate

Estate planning is a key concern for most of us, but it is complex and can be confusing. One powerful estate planning tool is a trust. Here is a look at a number of trust types that may be right for you.

Revocable Living Trust

A revocable living trust is a trust that is created by the grantor during their lifetime. The grantor can modify or revoke the trust during their lifetime as well. Revocable living trusts allow the grantor to retain control over their assets during their lifetime and to some extent after their death.


  • A revocable living trust avoids probate, allowing the grantor and the beneficiaries to protect their privacy.
  • A revocable living trust can help minimize estate taxes.
  • This type of trust allows for a trustee or successor trustee to manage the trust’s assets if the grantor becomes incapacitated.
  • Allows the grantor to determine when and in what fashion trust beneficiaries receive the trust assets.
  • These trusts are relatively inexpensive to establish.


  • Revocable living trusts do not provide asset protection since the trust assets remain available to the grantor’s creditors.
  • A revocable living trust may cause problems for the grantor when applying for Social Security or Medicare benefits due to the potential income generated from the trust’s assets.

Irrevocable Trusts

An irrevocable trust can be created during the grantor’s lifetime or upon their death as part of their estate planning. As the name implies, an irrevocable trust does not allow the grantor to remove the assets from the trust once they have been given to the trust.


  • Assets in an irrevocable trust are exempt from probate and offer the grantor and their heirs a degree of privacy.
  • They can reduce or eliminate the cost of transferring assets such as probate costs, estate taxes and gift taxes.
  • The assets in an irrevocable trust are beyond the control of the grantor and as such are out of the reach of the grantor’s creditors.
  • The grantor can control when and in what format the beneficiaries receive their inheritance.
  • In community property states, an irrevocable trust can be structured to not become community property if the grantor so wishes.


  • Once the trust is implemented, it cannot be changed. This includes the beneficiaries and the terms of the trust.
  • The assets in the trust cannot be accessed by the grantor if needed later on.
  • An irrevocable trust can be costly to create and generally requires legal help.

Charitable Trusts

Charitable trusts can be established during the grantor’s lifetime or upon their death. Charitable trusts benefit one or more charitable organizations and can also benefit the grantor or their heirs. They can also be a solid alternative to those who are charitably inclined and who are looking for tax benefits as well. There are two main types of charitable trusts.

Charitable Remainder Trusts (CRT)

A CRT provides the donor or their beneficiaries with income from the investments of the trust assets during their lifetime. The CRT can be structured as charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT). With a CRAT, the donor receives a fixed annuitized payment, whereas with a CRUT, the payments can vary as a percentage of the trust principal.

Upon the donor’s death, the remaining assets are donated to the public charity or private foundation for which the trust was established.


A CRT can be funded with cash or a gift of securities. This can be a good way to donate appreciated securities to avoid the capital gains taxes on those assets. Donations may be eligible for a partial tax deduction.


Charitable Lead Trust


A charitable lead trust works in the opposite fashion to a CRT. The money in the trust first goes to benefit the charitable organization(s) designated in the trust, with the rest reverting to the donor and/or their beneficiaries after the passage of a designated period of time.


Depending upon the structure of the charitable lead trust, donors may be able to take a partial tax deduction when funding the trust. These trusts are taxable and are irrevocable once established.


Marital Trusts


There are a number of marital trusts that can be established depending upon the needs of the grantor.


AB trust


This is a separate marital trust. The “A” portion of the trust is a trust established for the surviving spouse. The “B” portion is a bypass trust that will transfer assets to non-spousal beneficiaries. The surviving spouse may have limited access to the B portion during their lifetime, and upon their death any assets left in the A portion as well as in the B portion pass onto the beneficiaries named in the trust.


Qualified Terminable Interest Property (QTIP) trust


A QTIP trust is similar to an AB trust in that it provides for both a surviving spouse and the couple’s heirs. A QTIP is common when the grantor spouse has children from a prior marriage that they want to benefit from their assets. With a QTIP, the surviving spouse receives income from the trust with the balance of the assets in the trust held for the non-spousal heirs upon the surviving spouse’s death.


Joint Marital Trust


This is a single trust covering both spouses. This type of trust can provide a degree of simplicity upon the death or incapacitation of one of the spouses. A joint trust works well if both spouses are in agreement as to the beneficiaries of the trust. It may not work as well in the case of a second marriage or if it is anticipated that one spouse may have issues with creditors.


How a financial advisor can help


Your financial advisor can help you identify your estate planning goals and any issues you might have as far as structuring an estate plan. In many cases, they will work in conjunction with an estate planning attorney to help advise you in establishing an estate plan. This will generally include a will, beneficiaries to retirement accounts and insurance policies, and may include a trust.


Contact your Wedbush financial advisor to discuss your estate planning needs and for help articulating your goals.



These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.