Estate Planning and Trusts-How to Find the Right Option for You!
We’re sure you’ve heard the phrase “failing to plan is planning to fail”. Estate planning is a lot like that. Figuring out how to protect and distribute your assets after you pass is important for everyone.
Two of the main types of trusts are:
Revocable Living Trust- can be amended or revoked at any tie by the grantor. Because the grantor has the ability to amend or revoke the trust, and therefore still has the control over the property in the trust, the property in the estate is still included in the grantor’s estate upon the grantor’s death. Therefore, revocable living trusts do not provide shelter for assets from federal or state estate tax.
Irrevocable Living Trust- cannot be modified or revoked once it has been established. An irrevocable living trust is usually created to reduce estate and income taxes. It is unusual for the grantor to serve as the trustee of an irrevocable trust without losing the intended tax benefits.
Other types of trusts include:
Testamentary Trusts: By the terms of your will, testamentary trusts are created after your death. The assets to fund a testamentary trust usually go through probate. A common example of a testamentary trust is one created by a parent leaving assets to a child. The testamentary trust is administered by a trustee until the child reaches a stated age, at which point the assets are then transferred to the child.
Special Needs Trusts: A Special Needs Trust is a trust established for the benefit of a person under age 65 who is disabled. A trust that meets the requirements of a Special Needs Trust is excluded as an asset for a person whose MA basis of eligibility is due to blindness or disability.
Blind Trusts: Blind trusts refers to trusts established so that neither trustor or the beneficiary knows what assets are inside the trust after its creation. The trustee manages the trust until the beneficiaries are supposed to receive the assets or until the trustor closes the trust for those that are revocable.
Charitable Trusts: A charitable trust is when a donor gives ownership to a charity or creates a charitable foundation to manage and distribute assets such as cash, securities, and valuables, among others. Not only does the donor do a good deed, but the IRS also offers attractive tax benefits for creating a trust.
Asset Protection Trusts: An asset protection trust (APT) is a trust vehicle that holds an individual’s assets with the purpose of shielding them from creditors. Asset protection trusts offer the strongest protection you can find from creditors, lawsuits, or any judgments against your estate
Constructive Trusts: A constructive trust is not an actual trust by the traditional definition. It is a legal fiction that is used as a remedy for unjust enrichment. Hence, there is no trustee, but the constructive trust orders the person who would otherwise be unjustly enriched to transfer the property to the intended party.
Totten Trust: A Totten Trust is a revocable trust that is a payable-on-death bank account that names an account beneficiary. A Totten Trust is a way to pass money, not property or other assets, to your heirs. An Illinois Totten Trust, called a payable-on-death account, is best for accounts with over $100,000 deposited.
QTIP Trust: Qualified Terminable Interest Trust (QTIP Trusts) are an estate planning tool used to maximize a couple’s applicable exclusion amounts while qualifying for the marital deduction. Full property interest transfers to spouses do not trigger most gift or estate taxes under the marital deduction.
The way you want to handle your assets is as unique as you are. Let the attorneys at Wagner, Falconer & Judd help you create an estate plan that works best for YOU.