8 Types of Trusts You Can Establish with Estate Planning
There’s a misconception that estate planning is only for very wealthy individuals; however, essentially everyone can benefit from learning about how wills and trusts can carry out your wishes after your death. One valuable estate planning tool is trust, which is an arrangement in which a person gives property to another person to be held for a beneficiary.
This article will explain what is a trust fund, the different types of trusts, and the overall benefits of a trust fund more generally as well.
General Benefits of Estate Planning Trusts
There are many benefits of a trust fund, including being able to ensure how your assets are distributed after death to support the people you love in the future. Estate planning Trusts help to minimize the amount of your money that is lost through the estate or gift taxes. Trusts also help your family avoid the costs and delays of receiving the money they are entitled to because of a lengthy probate court process.
1. Credit-Shelter Trust
A credit shelter trust is a type of trust that helps married couples reduce their estate taxes by taking advantage of all available federal and state exemptions. It is most relevant for multi-million-dollar estates and when each spouse has sizable wealth.
2. Living Trust
Other types of trust funds are living trusts, which are created during a person’s lifetime and appoint a trustee to manage that person’s assets for an eventual beneficiary. Living trusts make it easy to transfer assets after death without having to go through probate.
3. Irrevocable Trust
Irrevocable trusts are estate planning trusts in which the terms cannot be changed or terminated without the named beneficiary approving them. People often set up these trusts to save on taxes because irrevocable trusts remove incidents of ownership and assets from the grantor’s taxable estate.
4. Revocable Trust
Meanwhile, a revocable trust can be changed or canceled by the grantor, and trust income earned goes to the grantor. This trust gives more flexibility to the grantor until the property is eventually transferred to beneficiaries upon death.
5. Life Insurance Trust
Among the different types of trusts is the life insurance trust, which cannot be changed or amended and features a trust that owns a life insurance policy. The trust can directly purchase the life insurance policy or have ownership of an existing policy transferred to it for tax saving benefits.
6. Qualified Terminable Interest Property Trust
This type of trust enables a marital spouse to give property to the other spouse without having to pay a federal gift tax. It qualifies for a marital deduction and establishes control over how trust assets are distributed upon the death of a spouse.
7. Testamentary Trust
A testamentary trust is established alongside a last will and testament and names a trustee to manage and distribute assets to beneficiaries in the will. It is irrevocable and also reduces estate tax responsibilities.
8. Charitable Trust
If you want a portion of your estate to support nonprofit causes you care about, then consider setting up a charitable trust. This trust holds assets until they are distributed to charities and offers both valuable tax breaks and opportunities to make a real difference in the world.
Set Up Your Own Trust in New York
If one or more of these different types of trust interests you, contact the Alatsas Law Firm to speak to an experienced estate attorney to guide you through the process. We have the skill and experience to fully satisfy all of your estate planning needs. To get started, simply fill out our online form or call us at 718-233-2903 for a free consultation.