Specialty trusts are not a specific type of trust, but a variety of different types of trusts. Some of these trusts include irrevocable trusts, special needs trusts, qualified personal residence trust, life insurance trusts, or charitable remainder trusts amongst many others. Each of these trusts has an important use in some very specific situations.
An irrevocable trust is a trust where the grantor gives up any control to change or amend the trust. It is common to use an irrevocable trust when planning for the possibility of entering a nursing home or other long-term care facility, as assets in certain irrevocable trusts may not get counted by the government when determining if any government aid is qualified for. At times, a revocable trust can become irrevocable. This is common when a married couple has a joint-trust and the couple wants to be sure that the survivor will not change the beneficiaries or key provisions. The trust will become irrevocable at the death of the first spouse.
A special needs trust is used when someone with a disability is wanting income in addition to any government aid that is qualified for. A special needs trust is sometimes referred to as a supplemental needs trust because the trust is only allowed to provide supplemental needs that the government aid does not provide. This type of trust protects the remaining beneficiaries as it slows the use of trust assets compared to if the trust was not setup to supplement government benefits.
A qualified personal residence trust is primarily used for tax planning purposes. This type of trust allows a transferor to transfer a house while not including the house in the taxable property of the estate. The grantor still maintains the right to reside in the house for a set number of years.
A life insurance trust is a good way to insure something of value is left for an heir. As soon as the grantor passes away, the life insurance falls into a trust for the beneficiaries. It is not funded until the death of the grantor usually and the trust will then control how the funds are distributed.
A charitable remainder trust generally limits the amount of property distributed for the primary beneficiaries. Any amount of principal or income of the trust that is not distributed to a beneficiary will remain in trust for a set and then distributed to a specific charity.