What is Estate Planning Trust
This is simply an estate planning tool used to transfer assets to your heirs, also known as beneficiaries, after your death. Once you have established an Estate Planning Trust, you can designate an individual or institution, known as a trustee, to manage the account for the benefit or your beneficiaries. Also, it is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.
Types of Estate Planning Trust.
There are many different types of Estate Planning Trusts. Some become effective as soon as you set them up, and others are only enforceable after your death. But the two main types are:
1. Revocable Trust.
A revocable trust can be changed or canceled at any time by the creator (grantor), who often acts as the trustee. The assets in the trust are still owned by the grantor and, therefore, any revenue generated by the trust must be reported on their personal taxes. Revocable trusts become irrevocable when the trustor dies.
2. Irrevocable Trust.
An irrevocable trust cannot be modified or revoked by the grantor without the permission of its beneficiaries. Once an irrevocable trust is established, the grantor relinquishes ownership and control of the assets listed in the trust, which are then transferred out of their personal estate. Despite this inflexibility, irrevocable trusts offer asset security and tax advantages, making them an attractive type of living trust for people with large or complex estates.
Other different types of Estate Planning Trust
A testamentary trust, or will trust, is set up through a provision in your last will and testament. It’s used to appoint a trustee to manage and distribute your assets upon your death. After the probate process determines the will’s authenticity, the executor transfers the assets into the testamentary trust.
Special Needs Trust.
A special needs trust is established to meet the financial requirements of a dependent with special needs, and appoints them as the beneficiary. It funds the beneficiary’s medical care or day-to-day needs while retaining the dependent’s entitlement to government benefits. There are two main types of special needs trusts: first-party and third-party.
Qualified Terminal Interest
A QTIP trust divides your assets among your beneficiaries at different times. A common approach is to allocate income from the trust to your spouse upon your death and then to your children when your spouse dies. A QTIP trust restricts your spouse from accessing the full principal amount of the assets, but rather allows them to access income from your trust for the remainder of their lifetime.
The trustees of a blind trust manage the assets in the trust without the beneficiaries’ knowledge. The beneficiaries have no input into how the assets are handled. This kind of trust is useful if conflicts are likely to arise between the trustees and beneficiaries, or among the beneficiaries themselves.
A charitable trust is established during the trustor’s lifetime, and distributes assets to the chosen charity or non-profit organization upon the trustor’s death. This type of trust account allows the charity to avoid or reduce estate taxes or gift taxes.
A Totten trust is also called a payable-on-death account. You deposit money in a bank account or other security, and name a beneficiary for the account who will inherit the funds upon your death. This kind of trust is revocable, and the beneficiary doesn’t have access to the accounts while you are alive.
Asset Protection Trust
As the name would suggest, an asset protection trust (APT) is the best type of trust to protect your assets against creditors, legal disputes, or judgments against your estate. This type of trust account allows the trustee to hold your assets so that they’re protected from taxation, divorce, bankruptcy, and other judgment creditors.
A spendthrift trust is useful if you believe your heirs will squander their inheritance, because it allows you to specify when and how your beneficiaries may access assets designated to them. For example, you could state that beneficiaries may only receive income earned by the assets rather than access the full principal amount of the assets.
A constructive trust is applied by a court when it determines that a party secured possession of assets unfairly, referred to as “unjust enrichment.” The court creates a constructive trust which is considered an “implied trust” since the grantor didn’t establish it during their lifetime. The purpose a constructive trust is to transfer assets that were intended to go to someone else to the rightful owner(s).
A tax by-pass trust (also know as a tax by-pass trust) is set up for individuals who don’t want their estate to be subject to federal estate taxes multiple times. It’s often used by married couples to pass assets to the surviving spouse, and then onto children after the surviving spouse passes.
Resources on Estate Planning Trust
Moreover there are so many resources foundations or facilities as regards Estate Planning Trust which has been in circled. Most often than not, helped in creating solution to a seemed or problematic situations, providing information, creating awareness to a misguided concept about Estate Planning and providing lost solutions. Here are few of many.
- Cornell’s State Probate Statutes on the Internet
- Estate Planning Links
- National Network of Estate Planning Attorneys
- American College of Trust & Estate Counsel
- ABA’s Probate & Property Magazine
If you would like to learn more about the necessity of estate planning, any one of our estate planning attorneys would be happy to assist you.