3 Invaluable Estate Planning Trusts You Should Consider

Trusts are a nuanced part of estate planning and can make sure that assets are passed on to your loved ones in a controlled manner. While there are many terms and concepts to grasp when it comes to understanding trusts, it also helps to appreciate that there are several types of trusts. This article examines just a few of the most common trusts which can be used advantageously to achieve various estate planning goals.

# 1 – Bypass Trust

Sometimes referred to as a credit shelter trust, these trusts are primarily used for tax reduction. The trust, however, also has several non-tax related benefits. For example, bypass trusts can protect assets from poor investment decisions as well as creditors and financial scams. Bypass trusts can also help to guarantee that children or beneficiaries are the ultimate recipients of the trust’s assets. As a result, these trusts are commonly used when one spouse has been previously married. The challenge presented by bypass trusts, however, is deciding how much to transfer into the trust. There’s no universal answer as to the extent of an estate to transfer to a bypass trust, but an experienced estate planning attorney can help you make this decision.

# 2 – Irrevocable Life Insurance Trusts

An irrevocable life insurance trust which in most cases is passed to a person’s children and sometimes then grandchildren. A person purchases a life insurance policy on the individual’s life then transfers cash to the trust to pay insurance premiums. After the trust creator passes away, the insurance benefits are then paid to the trust without being subject to taxes. The trust offers protection from creditors as well as beneficiaries as well as lessens the chance of poor financial decisions. Consequently, irrevocable life insurance trusts can provide several generations with assets at a reduced tax rate.

# 3 – Qualified Terminal Interest Property Trust

Whichever spouse is the first spouse to pass away leaves either some or all of his or her estate in a qualified terminal interest property trust. The surviving spouse then receives income from the trust. Once the surviving spouse passes away, assets are then distributed through the trust to the final beneficiaries, which in most cases are the couple’s children. While the estate of the first spouse is not taxed on the assets transferred to the trust, all of the assets that are in the trust when the surviving spouse passes away are included in that individual’s taxable estate. One of the best features of the trust is that the first spouse’s estate executor can determine the extent of the estate passed into the trust and that this amount need not be finalized at the time that the will is written.

Contact an Experienced Estate Planning Attorney

If you or a loved one needs help creating a trust, it can help to speak with an experienced estate planning attorney. During a free case evaluation, an attorney at Ettinger Law Firm can discuss your various available options to achieve your estate planning goals. Do not hesitate to reach us today for assistance.

Contact Information