A trust is a legal contract that gives instructions on how to manage assets after you or a loved one has passed. Trusts can be confusing because there are many different types of trusts, with many different purposes and names. Here are some of the types of trusts that we can help you with:Special Needs Trust (SNT)A Special Needs Trust, sometimes called a supplemental-needs trust (SNT), is a tool used when planning for a beneficiary with a disability. Without a Special Needs Trust the beneficiary could lose their Supplemental Security Income (SSI) or Medicaid (ALTCS) benefits if he or she receives an inheritance directly that increases their wealth. The Special Needs Trust names a trustee to manage the assets for the beneficiary and allows for discretion to supplement their needs, but not to provide too much from the trust so that they lose their benefits.Dynasty Trust (Generation Skipping Trust)A Dynasty Trust is a trust that is designed to shelter assets from estate taxes and potential creditors of the beneficiaries. This is also referred to as a “Generation Skipping Trust”. The term “generation-skipping” is a misnomer. It is not that we are skipping a generation from the benefits of an inheritance. Rather, the Dynasty Trust includes provisions so that the next generation can skip estate taxes. Upon your death, your children have the use and enjoyment of the Generation Skipping Trust for their entire lifetime. It is upon your children’s deaths that the tax-free “skip” occurs. The Generation Skipping Trust passes from your children to your grandchildren free of any estate taxes. If structured properly, the assets of the Dynasty Trust satisfy the provisions of Arizona’s “spendthrift” statute and are therefore are protected from creditors going after your children’s inheritance. Consequently, creditors resulting from lawsuits, divorce, or bankruptcy cannot attack the assets of the Generation Skipping Trust.IRA Look-Through TrustThe Supreme Court recently found that a child who inherited an Individual Retirement Account (IRA) from her mother and filed for bankruptcy nine years later, could not shield the account from her creditors. A trust can protect the IRA assets from bankruptcy and other creditors, the most common type being a divorcing spouse.The default taxation rule when a trust is named as the beneficiary of a retirement account is that the money must be paid out and all the income taxes must be paid within five years.The five-year rule applies if the account owner had not reached the required beginning date for taking IRA withdrawals (April 1 of the year after the account owner reaches 70 ½) before he or she died. If the owner died on or after this date the withdrawals are calculated according to the account owner’s remaining life expectancy, as if he or she were alive. This would probably mean a more rapid payout than if the trust could use the life expectancy of its oldest beneficiary to calculate withdrawals.With a properly drafted trust, the IRS will “look through” the trust and treat its beneficiary as if he or she were directly named the beneficiary of the IRA. This enables the trust to take advantage of favorable minimum-distribution rules that apply to individual beneficiaries. In trusts with multiple beneficiaries, the required yearly withdrawal will be based on the life expectancy of the oldest beneficiary. An IRA Look-Through trust provides the protection of a trust with the favorable tax treatment of an individual.Custom Incentive TrustA Custom Incentive Trust uses the income and principal of a trust to encourage or discourage certain behaviors. For example, the money in the trust fund cannot be inherited unless certain incentives have been met.The most common is a trust that encourages education. Other common types of incentives are income matching trusts, to provide an incentive to work, or trusts that require drug testing to discourage drug use. Other types of incentives can be designed as long as it can be measured and is not against public policy. The condition needs to be something that can easily be measured and enforced by the trustee.