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10 Types of Trusts

Navigating the vast array of trusts can appear overwhelming when creating your estate plan. However, as estate planning attorneys, we handle these matters every day. With our knowledge of the laws, we can design a customized plan that addresses your specific needs.

Here’s a brief overview of ten common types of trusts to provide you with a general understanding of the available options. Rest assured, there won’t be a quiz at the end. When we meet, simply come prepared to share your goals, family dynamics, and financial situation, and we’ll design a plan incorporating the most suitable documents for your circumstances.

  1. Bypass Trust: Also known as a credit shelter trust, family trust, or B trust, a bypass trust contains a portion of a deceased spouse’s accounts and property. It utilizes the deceased spouse’s lifetime exclusion amount to reduce or eliminate estate tax. This trust is bypassed for estate tax purposes when the second spouse passes away.
  2. Charitable Lead Trust: A charitable lead trust provides a stream of income to a charity of your choice for a specified period or lifetime. At the end of the term or upon death, the remaining assets pass to you or your loved ones, resulting in significant tax savings.
  3. Charitable Remainder Trust: This trust offers you a stream of income for a designated period or lifetime, after which the remaining assets are donated to the charity of your choosing. Similar to the charitable lead trust, it provides substantial tax benefits.
  4. Special Needs Trust: A special needs trust enables you to provide financial support for someone with special needs without jeopardizing their eligibility for government benefits. Carefully crafted trusts can preserve certain benefits while ensuring adequate provisions.
  5. Generation-Skipping Trust: This trust allows you to distribute assets to your grandchildren or future generations without incurring taxation. By using your lifetime exemption, you can offset any potential tax obligations.
  6. Grantor Retained Annuity Trust: An irrevocable trust that provides you with an annuity for a specified period based on the trust’s property value. At the end of the annuity period, the remaining assets pass to your named beneficiaries. This trust is useful for making substantial gifts of appreciating assets to your loved ones.
  7. Irrevocable Life Insurance Trust: Designed to hold high-value life insurance policies, this trust ensures that the insurance proceeds are excluded from your estate for tax purposes. The proceeds can be used to provide liquidity for tax payments, equalize inheritances, or fulfill other intended purposes.
  8. Marital Trust: A marital trust safeguards accounts and property for the surviving spouse’s benefit while qualifying for the unlimited marital deduction. Although included in the deceased spouse’s estate for tax purposes, these assets are exempt from estate tax at the first spouse’s passing.
  9. Qualified Terminable Interest Property Trust: This trust initially provides income to the surviving spouse and distributes the remaining assets to other named beneficiaries upon the surviving spouse’s death. It allows for the unlimited marital deduction while maximizing estate and generation-skipping tax exemptions.
  10. Testamentary Trust: Created within a will, a testamentary trust is established after the individual’s death. It protects money and property on behalf of beneficiaries, rather than transferring assets directly to them. Testamentary trusts can be used for minors, individuals with medical or substance abuse issues, or to shield assets from lawsuits or divorcing spouses. However, they require the probate process before activation.

Numerous trust options exist, and we will help determine which, if any, align with your needs. Schedule your in-person or virtual appointment today, and we’ll be ready to assist you.

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