Choosing the right estate plan can feel overwhelming given the many types of trusts available. However, our estate planning attorneys, handle this every day. We understand the laws and design plans that address your unique situation. Below is a brief overview of ten common types of trusts to help you understand your options.
When we meet, you do not need to memorize anything. Simply share your goals and provide details about your family and finances. Then, we will create a plan that incorporates the best documents for your needs.
1. Bypass Trust
Also called a credit shelter trust, family trust, or B trust, a bypass trust holds part of a deceased spouse’s property. It uses the deceased spouse’s lifetime exclusion to reduce or eliminate estate tax. The trust bypasses estate tax for the second spouse’s death.
2. Charitable Lead Trust
A charitable lead trust provides income to a chosen charity for a set number of years or a lifetime. Afterward, the remaining assets go to you or your heirs, often generating significant tax savings.
3. Charitable Remainder Trust
A charitable remainder trust pays you income for a specified time or lifetime. Then, it transfers the remaining assets to your chosen charity, offering tax advantages.
4. Special Needs Trust
A special needs trust lets you provide funds or property for someone with special needs without affecting their government benefits. Federal law allows beneficiaries to maintain eligibility when the trust is properly structured.
5. Generation-Skipping Trust
A generation-skipping trust passes assets to grandchildren or later generations without triggering extra taxes. You can use your lifetime exemption to offset potential tax liability.
6. Grantor Retained Annuity Trust (GRAT)
A GRAT is an irrevocable trust that pays you an annuity for a fixed period. After that period, the remaining assets transfer to your chosen beneficiaries. This trust can help gift growing assets efficiently.
7. Irrevocable Life Insurance Trust (ILIT)
An ILIT owns life insurance and receives the death benefit when the trustmaker passes away. The proceeds remain excluded from the deceased’s estate for tax purposes. You can use them to pay taxes, fund buy-sell agreements, or equalize inheritances.
8. Marital Trust
A marital trust protects assets for a surviving spouse and qualifies for the unlimited marital deduction. It allows the estate to defer taxes until the surviving spouse passes away.
9. Qualified Terminable Interest Property Trust (QTIP)
A QTIP initially provides income to the surviving spouse. Then, after their death, the remaining assets pass to other named beneficiaries. QTIP trusts are common in second marriages to maximize estate and generation-skipping exemptions.
10. Testamentary Trust
A testamentary trust forms through a will upon the trustmaker’s death. It protects assets for beneficiaries who are too young, have special needs, or cannot manage their finances responsibly. Unlike revocable living trust or an irrevocable trust, go through probate before becoming active. They can also offer protection against lawsuits or divorce claims.
Discuss Your Estate Plan Options With Our Modesto Estate Planning Lawyers
With so many types of trusts available, estate planning can feel overwhelming. . However, our team can guide you in choosing the right trust or combination of trusts for your needs.
Call us today at (209) 876-8886 to schedule your in-person or virtual appointment Alternatively, you can contact us online.. We look forward to helping you secure your family’s future.