Estate Planning – Using Trusts

Estate Planning – using Trusts

In addition to having a Will, depending on your financial situation you might want to consider using trusts in your estate planning strategies.

There are numerous types of “trusts” which can range from quite simple to very complex and hard to implement.

Number one rule if the trust is to benefit your spouse, “you should cause the trust to be included in the second spouse’s estate.”

Review the video below : Good explanation on “how to set up a trust”

Some of the most common trusts are:

  • Irrevocable Trust – appreciation and distributions will happen outside the estate and will not be subject to federal income tax. Downside to this type of trust is the fact that it is irrevocable and the grantor loses control of the asset or assets.
  • Irrevocable Life Insurance Trust – when the death benefit is paid to a trust instead of an estate or individual, it stays outside the estate’s taxable value. In order to escape taxation make sure any transfers of existing policies are three years or longer.
  • Spousal Limited Access Trust – you use your gifting exemption while still retaining access to the assets. You create an irrevocable trust and contribute up to your total exemptions and name your spouse as beneficiary. You may include additional beneficiaries as well; no taxes are due at the death of either spouse.
  • Credit Shelter Trust – used to provide additional shelter if the estate is likely to grow beyond what the portability will shelter. It is recommended that you create a provision in your will saying any disclaimed assets must pass into a credit shelter trust.
  • QTIP Trust – A trust into which the trustor deposits funds and other assets to provide for a surviving spouse while also maintaining control of what happens to those assets after the surviving spouse dies.
  • Charitable Remainder Trust – assets be paid to you for life, your children and then go to charity. Final word on trusts, make sure you hire an estate planning attorney rather than a general practice attorney as the tax laws are complicated and forever changing.

Daniel F. Iuculano, AAMS CMFC

Accredited Asset Management Specialist

Chartered Mutual Fund Counselor

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