3.8 Types of Trusts

• Library: Estate Planning in Virginia (Virginia CLE) (2018 Ed.)

3.8 TYPES OF TRUSTS

3.801 In General. As explained in paragraph 3.9 below, there are many situations in which the estate planner advises the client to use one or more trusts to accomplish the client's estate planning objectives. Trusts can be categorized in a number of ways. A trust may be revocable or irrevocable, living or testamentary, grantor or nongrantor, funded or unfunded.

3.802 The Virginia Uniform Trust Code. The Virginia Uniform Trust Code (VUTC), which became effective on July 1, 2006, codifies a considerable amount of law relating to trusts. ⁵⁸ It imposes default rules that, in most cases, may be modified by the express terms of the trust document. Because these default rules generally conform to the law in effect in Virginia at the time the VUTC became effective, its enactment serves primarily to consolidate, rather than to modify, the law relating to trusts. ⁵⁹ But in some

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respects, such as the requirement to give notice to trust beneficiaries in the absence of language in the trust document providing otherwise, the VUTC imposes requirements on trustees that were not a part of the law before its enactment.

3.803 Revocable Versus Irrevocable Trusts. A revocable trust is a trust that can be altered, amended, or revoked by the grantor (creator) of the trust. ⁶⁰ While an irrevocable trust cannot be revoked by the grantor, the grantor may retain the power to make investment decisions and to control the distribution of income and principal to the beneficiaries. In addition, the grantor can retain the power to add or delete beneficiaries of the irrevocable trust. Nevertheless, in most cases, the term "irrevocable trust" refers to a trust in which the grantor has relinquished not only the right to revoke, amend, or modify the trust, but also the right...