For many individuals, estate planning and trusts can be confusing. The idea of avoiding probate is attractive, but reviewing types of trusts may seem challenging, especially as special needs trusts are researched. For many, a revocable trust is the most appropriate option. This type of situation is ideal for safeguarding an estate while allowing the testator to maintain control of the assets. Other types of trusts should be researched based on unique family dynamics or financial concerns.
Those who have significant assets to protect might consider irrevocable trusts, credit shelter trusts, or qualified personal residence trusts. An irrevocable trust is difficult to change. Additionally, an individual relinquishes control of related assets by putting them in the name of the trust. One benefit of such a trust is that appreciated assets are not affected by estate taxes. A credit shelter trust is also called a family trust and is designed to set aside an amount less than or equal to the exemption amount for estate tax purposes. The remaining assets can then be bequeathed to a spouse free of estate taxes. In a qualified personal residence trust, a trust is designed to handle a home, especially one that might increase in value, so that the taxable estate value does not become inflated.
Unique family situations may prompt certain trust choices. For example, a generation-skipping trust may reserve much of an estate for heirs who are removed by at least two generations. A qualified terminable interest property trust may ensure that children of one’s prior marriages are able to inherit after a later spouse expires.
In determining which special interest trusts might be appropriate for one’s situation, reliable legal information may be important. This may ensure that unanticipated outcomes are avoided as documents are prepared according to the law.
Source: CNN Money, “What kinds of trusts are there?“, December 05, 2014