Trusts are a commonly used tool in estate planning. There are many types of trusts Nevada residents may choose from when they are evaluating their estate planning options.
A qualified domestic trust may be used when the trustee is a United States citizen, and his or her spouse isn’t. The trust ensures that the IRS will receive estate taxes upon the death of the U.S. citizen. This type of trust can be used to transfer an unlimited amount of marital property to a spouse and help the trustee avoid estate taxes prior to death because the trust can be drafted so that assets in the trust qualify for a federal estate tax marital deduction.
A charitable remainder trust is designed to provide income to a noncharitable beneficiary for a specified term or the remainder of the beneficiary’s life. After the term or upon death, the remaining assets will go to charity. This type of trust may allow the beneficiary to take a partial income tax deduction to preserve the value of their estate.
A third type of trust is a grantor retained annuity trust. This type of trust allows the trust maker (or grantor) to receive annuity payments for a specified term of years, after which the remainder of the trust property transfers to beneficiaries. The trust annuity payments are calculated according to IRS code. This type of trust allows recipients to avoid gift tax liability.
A person who is interested in choosing the right trust for them may wish to consult an estate planning attorney. An estate planning attorney may be able to help clients choose which type of trust or other estate planning instrument would be best for their situation. Trusts are useful for protecting valuable assets, avoiding tax liability, distributing assets and avoiding probate costs after death.