First, a spouse can now elect to treat property as community property and fund their credit shelter trust more easily without having to hold completely separate interests in the assets. It is anticipated that spouses will want to consider owning specific assets as community property because of the favorable ownership rates and to obtain the favorable step-up in basis for highly appreciated assets. This planning technique is best suited for business interests, real estate, brokerage accounts, and other assets with low basis and high appreciation. It is not recommended for an asset that has a fair market value that is less than its adjusted basis. There are many different types of trusts used for many different reasons.
Trusts are either revocable or irrevocable.
The revocable trust is most frequently promoted as a method of avoiding probate. With a revocable trust, the settlor retains complete control over the assets held by the trust, and on the death of the settlor, the assets are distributed in the same manner as they would through a will. The revocable trust does not eliminate estate taxes. They are used primarily to minimize the payment of federal transfer taxes. As the name suggests, once created, the trust cannot be altered, amended, or revoked.