A trust is a legal arrangement in which a person (trustor) transfers property to another person (trustee) who then holds the property for the trustor or a third party (beneficiaries).
There are many advantages to creating a trust when you plan your estate. For one, it's the easiest way to transfer wealth to younger family members without their parents or other influences attempting to divert the funds to themselves.
Types of Trusts
A trustor can grant a few different types of trusts to their beneficiaries. These trust types include:
- Special Needs Trust: A way to provide living expenses to a disabled individual or family member who may not qualify for Medicaid, SSI, or some other aid program.
- Marital (A) Trust: This is designed to provide benefits to a spouse in the event of the trustor's death.
- Marital (B) Trust: This is established to bypass a surviving spouse's estate to make full use of federal estate tax exemptions.
- Testamentary Trust: Created in a will after the death of the trustor. It uses funds subject to probate and transfer taxes and is usually subject to court supervision after it is dispersed.
- Irrevocable Life Insurance Trust (ILIT): An irrevocable trust designed to exclude life insurance proceeds from the trustor's taxable estate while also providing liquidity to the estate.
- Charitable Remainder Trust: This allows the beneficiary to receive an income stream from a defined period of time and gifts the remainder to a charity.
- Generation-Skipping Trust: This permits trust assets to be distributed to grandchildren (or later generations) of the trustor without incurring a generation-skipping or estate tax in the event of death of their children.
- Qualified Terminable Interest Property (QTIP): This is used to provide income to the surviving spouse of the trustor. It is often used in second marriages.
- Grantor Retained Annuity Trust (GRAT): An irrevocable trust funded by gifts of the trustor. It is designed to shift future assets to the next generation during the trustor's lifetime.
Labovitz Law Firm Can Help
If you are thinking about creating trusts for your family members, our estate planning attorneys have your back. We are dedicated to helping you create peace of mind concerning your property so you don't have to worry what happens to your estate.
Call our firm today at (817) 374-4056 or contact us online for a free legal consultation.