Most people wish to leave the valuable assets they acquired over the course of a lifetime, such as real estate and savings, to the next generation. One of the best ways to achieve this goal is by setting up a trust. A trust is a financial arrangement between three parties. In a typical trust the Trustmaker, also called a Trustor, Grantor or Settlor, grants another party, the Trustee, the power to hold assets and distribute them to a third party, the beneficiary, at a designated time.
Knowing what type of trust is best for you and your family is not always easy. There are a variety of trusts for people in different situations and it will take some research and diligence to determine which trust is best for your situation. Seek guidance from a legal professional to provide you with the pros and cons of each type of trust.
Here are some of the most common trusts and a few details about each one:
- Living trust. A living trust allows you to control your assets while you are alive and well, provide for a successor Trustee in the event of your incapacity, and then protect your loved ones after your death.
- Charitable trust. A charitable trust may be a charitable remainder trust or a charitable lead trust. A charitable remainder trust provides a lifetime benefit to individuals with the trust balance passing to charity at some time in the future. A charitable lead trust provides a stream of income to a charity for a specific time period and then any balance reverts back to individual beneficiaries. Both have income tax or estate tax benefits.
- Special needs trust. A special needs trust allows the Trustmaker to provide a benefit for a person with special needs, while maintaining their eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI).
- Irrevocable life insurance trusts. An irrevocable life insurance trust may be used as a wealth replacement tool so that the proceeds from a life insurance policy are not included in the taxable estate of the insured.
- Generation-skipping trust. A generation skipping trust has estate tax benefits that allows the Trustmaker to benefit future generations including children, grandchildren, great grandchildren and beyond without paying a “generation-skipping” tax.
- Marital trust. A marital trust can provide financial benefits and asset protection to a surviving spouse.
- Qualified terminable interest property trusts (QTIP). A QTIP trust provides for the lifetime benefit of a surviving spouse and has estate tax benefits.
- Bypass or credit shelter trust. A bypass or credit shelter trust is an estate tax planning tool for the protection of a surviving spouse or family members while reducing estate tax exposure.
- Pet trust. A pet trust is a trust that is created specifically for the purpose of providing lifetime care to one or more pets. These trusts are valid in all fifty states and the District of Columbia.
- Testamentary trusts. A testamentary trust is part of a will or living trust and can be used to provide asset protection for beneficiaries who are not yet adults, have mental, medical, addiction or other issues.
- Grantor retained annuity trusts (GRAT). A grantor retained annuity trust can be used to limit estate and gift taxes when you make large financial gifts.
As you can see there are a large variety of types of trusts to choose from, which is why we recommend you speak with a qualified estate attorney before making any major decisions.
Estate planning and trust attorneys
The Law Offices of Hoyt & Bryan are leading the way in Florida estate planning and elder law. Our senior attorneys are board certified in Wills, Trusts and Estates as well as in Elder Law, and take pride in helping individuals and families plan for their future. If you are considering setting up a trust but wish to discuss your options with a professional, call us today at 407-977-8080 or contact us online.