Beyond Probate-Avoidance Living Trusts
If you’re familiar with any kind of trust, it’s probably the revocable living trust, which is a common element of many estate plans. This kind of trust lets your survivors avoid costly probate court proceedings after your death.
But lawyers have come up with many, many different kinds of trusts that accomplish other goals. There are trusts that let your family avoid estate tax, manage property left to young children, or keep money out of the hands of an adult who has a disability or is simply irresponsible with money.
Like probate-avoidance trusts, some of these other kinds of trusts are created while you’re alive. For some other trusts, you set up the paperwork while you’re alive, but the trusts don’t spring into existence until after your death.
Most of these trusts are considerably more complicated than a simple probate-avoidance living trust. You’ll probably want to consult a lawyer to see how they might fit into your family’s estate plan and to help draw up the documents you need.
Trusts That Save on Estate Tax
Trusts That Save on Estate Tax
-
The federal government allows married couples to transfer over $23 million without incurring estate tax. To get the same benefit, unmarried couples need an AB trust.
-
Keep the proceeds of your life insurance policy out of your taxable estate.
-
The Qualified Terminable Interest Property (QTIP) trust is especially useful with second (or third) marriages.
-
Using QDOTs to Plan for Noncitizen Spouses
This kind of trust can defer estate taxes for wealthy couples.
-
Dynasty Trusts: Tying Up the Family Fortune Forever
But do you really want to handcuff your children to preserve money for great-great-great-grandkids?
Other Trusts for Your Family
Other Trusts for Your Family
-
The federal government allows married couples to transfer over $23 million without incurring estate tax. To get the same benefit, unmarried couples need an AB trust.
-
If you want to set aside money to pay for a loved one’s education, you could set up an educational trust.
-
A testamentary trust is a type of trust that does not go into effect until the grantor (the person who made the trust) dies.
-
A spendthrift trust protects trust property from an irresponsible beneficiary and his or her creditors.
-
A sprinkling trust (or spray trust) gives a trustee power to decide how trust funds will be distributed to beneficiaries.
-
Leaving an Inheritance for Children
When you leave money or property for a child to inherit, arrange for someone to manage it.