Different Kinds of Trusts
You might have heard about irrevocable and revocable trusts or special needs trust, but did you know there are more than 30 different kinds of trusts? Many of these are complex and applicable to very specific situations. With any trust you will need a trust lawyer, but when it comes to these rarer types of trusts, it is essential to choose an experienced trust lawyer, like a trust lawyer.
Rare Types of Trusts
There are many types of trusts. Some of the rarer forms include:
Credit Shelter Trust – A credit shelter trust is also known as a “family trust” or a “bypass trust.” You will need to draft a will that bequests an amount to the trust up to, but not more than, the estate tax exemption. From here, the remainder of your estate can be passed to your spouse tax free. One of the biggest benefits to this trust is that as soon as the money is placed into a bypass trust, it becomes free from estate taxes.
Generation Skipping Trust – Also known as a dynasty trust, it allows you to transfer a very large amount of money into the trust, and still be free from taxes. In general, this trust must be for at least two generations your junior (i.e. at least your grandchildren).
Qualified Personal Residence Trust – This trust can remove the value of your home or another property from your estate. These trusts are most beneficial when you have property that will likely appreciate in value.
Irrevocable Life Insurance Trust – As a trust lawyer might tell you, this trust is ideal when you have life insurance and would like to remove it from your taxable estate, pay estate taxes, or provide your beneficiaries with money for various reasons. In order to do this, you will need to remove your policy from the estate. Your ownership rights to the policy will need to be surrendered, and you can no longer change it or borrow against it. In return, the proceeds can pay off any estate costs after your death. It also provides your heirs with tax-free income.
Gun Trust – A gun trust is ideal for anyone who has a gun collection with Class 3 weapons and select other destructive devices. The trust enables property to be transferred to and from the trust, and for both beneficiaries and trustees to be named.
Irrevocable Life Insurance Trust
These trusts are integral to estate plans with large amounts of wealth. At this time, the federal government gives individuals a $2 million tax exemption. Any portion of an estate beyond that amount is taxed as high as 45 percent. Estates worth more than 2 million can benefit from having life insurance as an estate planning tool. As an estate planning lawyer might tell you, there are flexible approaches to exclude life insurance proceeds from the estate of the surviving spouse and that of the first spouse to pass away. These are complicated trusts and should be handled by an experienced trust lawyer.
The Bottom Line About Trusts
Estate planning is complicated and demands professional oversight by a knowledgeable estate planning lawyer. If you would like to learn more about your estate planning options, and what trust may be right for you, please call a lawyer today.