A personal trust is a type of trust created for both individuals and/or their families which are typically created by high net worth individuals. Personal trusts come in 2 basic types: irrevocable and revocable. Simply put, an irrevocable trust means you can't amend, revoke or change the trust whereas a revocable trust allows you to amend or revoke the trust entirely. If you decide on an irrevocable trust, keep in mind you must be willing to give up complete control of the property in question. If you decide on a revocable trust, you will retain certain rights in the trust, like receiving income from the trust or the right to change a specific beneficiary, but keep in mind as well that the trust property will be included in your estate because you decided not to give up control of the assets of the trust.

A revocable trust is also known as a 'living trust'. The good news is the assets that are held in a living trust are not subject to probate (a lengthy legal process through which your estate is settled) and a living trust usually includes directions for handling your financial affairs should you not be able to do so yourself.

There are also other types of personal trusts including: Life Insurance Trusts, Charitable Trusts, Special Needs Trusts and Testamentary Trusts. Here's a brief overview of each:

1. Life Insurance Trusts
The benefit of life insurance trusts is that they exclude life insurance proceeds from an insured individual's taxable estate, in effect reducing liabilities around estate tax. These proceeds can then replace estate assets that could be used by the beneficiary to pay estate taxes and could provide a managed source of income for that beneficiary as well.

2. Charitable Trust
A Charitable Trust may be established during your lifetime or under the instruction of your will. Various types of charitable trusts enable you to make monetary contributions all the while maintaining an interest in the trust for your beneficiaries and/or yourself.

A benefit of a charitable trust is that it may also help minimize your estate taxes and provide income tax deductions as well. For example: say you contribute a security to a charitable trust with a low cost basis and the trustee sells the security. In this case, you could benefit from the proceeds generated from the sale of that security (ones that are invested in the trust) and receive an income tax deduction.

3. Special Needs Trust
Typically, a Special Needs Trust is created to allow for expenses that are above and beyond those expenses covered by government programs geared for individuals who have suffered from various disabling events.

4. Testamentary Trusts
Testamentary Trusts are generally established under your will and take effect upon your death. The goal of the Testamentary Trust is to help preserve your wealth, minimize your estate taxes, and provide for your spouse and children. Think of: your last will and testament.

Getting your head around various personal trusts, their features, components and tax benefits can be difficult at best, www.retireology.com is here to help answer some of the important questions and give you relevant info on personal trusts.