Considering the myriad of trusts available, creating an estate plan that works can seem daunting. However, that’s what we, as estate planning attorneys, do every day. We know the laws and can design a plan which addresses your specific situation.
Here’s a look at ten common trusts to provide a general understanding:
- Revocable Family Trusts. A Revocable Family Trust is used to hold your assets if you passed away while your children (or other beneficiaries) were still too young to handle a large inheritance. With maximum flexibility during your life, the Family Trust sets out your directions as to how, and when, your assets should be distributed after your death.
- Supplemental Needs Trusts. SNTs allow you to benefit someone with special needs without disqualifying them for governmental benefits. Federal laws allow special needs beneficiaries to obtain benefits from a carefully crafted trust without defeating eligibility for government benefits.
- Medicaid Asset Protection Trusts. Medicaid Asset Protection Trusts are a way to protect assets in case you or your spouse need assistance paying the cost of a nursing home for long term care. They are subject to very specific rules and timelines, so a MAPT needs to be executed and funded at least five (5) years prior to applying for assistance.
- Bypass Trusts and Marital Trusts. Commonly referred to as Credit Shelter Trust, Family Trust, or B Trust, Bypass Trusts do just that: bypass the surviving spouse’s estate to take advantage of tax exclusions and provide asset protection. Marital Trusts are designed to provide asset protection and financial benefits to a surviving spouse. Trust assets are included in his or her estate for tax purposes.
- Irrevocable Life Insurance Trusts. ILITs are designed to exclude life insurance proceeds from the deceased’s estate for tax purposes. However, proceeds are still available to provide liquidity to pay taxes, equalize inheritances, fund buy-sell agreements, or provide an inheritance.
- Charitable Lead Trusts and Charitable Remainder Trusts. A CLT is a split interest trust which provide a stream of income to a charity of your choice for a period of years or a lifetime, with the remainder going to you or your loved ones. In contrast, a CRT is a split interest trust which provide a stream of income to you for a period of years or a lifetime, with the remainder going to the charity of your choice.
- Generation-Skipping Trusts. GST Trusts allow you to distribute your assets to your grandchildren, or even to later generations, without paying the generation-skipping tax.
- Grantor Retained Annuity Trusts. GRATs are irrevocable trusts which are used to make large financial gifts to family members while limiting estate and gift taxes.
- Qualified Terminable Interest Property Trusts. QTIPs initially provide income to a surviving spouse and, upon his or her death, the remaining assets are distributed to other named beneficiaries. These are commonly used in second marriage situations and to maximize estate and generation-skipping tax exemptions and tax planning flexibility.
- Testamentary Trusts. Testamentary Trusts are created in a will. These trusts are created upon an individual’s death and are commonly used to provide for a beneficiary. They are commonly used when a beneficiary is too young, has medical or drug issues, or may be a spendthrift. Trusts also provide asset protection from lawsuits brought against the beneficiary.
There are many types of trusts available. We can help you select which trusts, if any, are a good fit for you and your family. Contact Attorney Michael Gove at mgove@govelawoffice.com, or Attorney Amanda Carpe at acarpe@govelawoffice.com to learn about your options.