Considering the myriad of trusts available, creating an estate plan that works can, therefore, seem daunting. Here’s a look at the basic ten common trusts to provide a general understanding. Therefore, all you need to do when meeting with an estate planning attorney is share your goals and insight into your family and financial situation.
10 Common Trusts
Commonly referred to as Credit Shelter, Family, or B Trust, a Bypass Trust does just that: bypass the surviving spouse’s estate to take advantage of tax exclusions and provide asset protection.
Charitable Lead Trust
CLTs are split-interest trusts which provide a stream of income to a charity of your choice for a period of years or a lifetime. Whatever’s left goes to you or your loved ones.
Charitable Remainder Trust
CRTs are split-interest trusts which provide a stream of income to you for a period of years or a lifetime and the remainder goes to the charity of your choice.
Special Needs Trust
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.
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 Trust
GRATs are irrevocable trusts which make large financial gifts to family members while limiting estate and gift taxes.
Irrevocable Life Insurance Trust
ILITs 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.
A Marital Trust provides asset protection and financial benefits to a surviving spouse. Trust assets are included in his or her estate for tax purposes.
Qualified Terminable Interest Property Trust
QTIPs provides income to a surviving spouse and, upon his or her death, the remaining assets distribute to other named beneficiaries. These are common in second marriage situations and, as a result, maximize estate and generation-skipping tax exemptions and tax planning flexibility.
Testamentary Trusts begin in a will. The creation of these trusts happen upon an individual’s death and commonly exist for a beneficiary. These are common when a beneficiary is under 18, has medical or drug issues, or maybe a spendthrift. Trusts also provide asset protection from lawsuits brought against the beneficiary.
How to Choose?
There are many types of trusts available. Working with a knowledgeable estate planning attorney will help you chose a plan that works for you and also your family.