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Understand the different types of trusts and what that means for your investments. Take out the guesswork with The Investor's Guide to Estate Planning for $1M+ portfolios.
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Jan 17, 2024 · Trusts are a specific tool within the larger scope of estate planning, focusing exclusively on the management and protection of assets. While estate planning encompasses a range of strategies, including wills, healthcare directives, and power of attorney arrangements, trusts offer a unique level of control and flexibility.
- Revocable Trust
- Irrevocable Trust
- Joint Trust
- Bypass Trust
- Qualified Terminable Interest Property Trust
- Special Needs Trust
- Asset Protection Trust
- Spendthrift Trust
- Generation-Skipping Trust
- Life Insurance Trust
Good for: People looking for flexibility in managing their assets during their lifetime A revocable trust can be changed or canceled by the grantor at any time as long as the grantor is mentally competent at the time of the decision. If you expect certain life changes (e.g., birth of a child) that can prompt the need to amend a trust, consider maki...
Good for: High-net-worth individuals looking for estate tax benefits and greater protection An irrevocable trust cannot be modified or revoked without its beneficiaries’ permission or the court’s interference. Once it is established, the grantor relinquishes ownership and control of the assets listed in the trust, which are transferred out of their...
Good for: Married couples who want to manage and distribute assets together A joint trust combines the assets of both spouses or committed partners for easier management and distribution. This type of trust is revocable before the second spouse passes away; both parties have the ability to manage and control the assets, often with the aim of passin...
Good for: Blended families for control over the disposition of assets after both spouses’ death A bypass trust, also known as an AB trust or credit shelter trust, is designed for married couples. It aims to protect and shield assets for beneficiaries while offering flexibility to a surviving spouse. In the context of blended families, a bypass trus...
Good for: Married individuals with significant estates seeking to minimize estate taxes A QTIP trust allows couples to optimize tax benefits while ensuring that assets are distributed according to their wishes. This type of trust is designed to qualify for the unlimited marital deduction, thereby sidestepping gift and estate taxes, while providing ...
Good for: Families with disabled dependents A special needs trust is established to meet the financial needs 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 qualification to receive government benefits such as Supplemental Security In...
Good for: High-net-worth individuals looking to protect assets from creditors or litigation As the name would suggest, asset protection trusts (APTs) are the best type of trust to protect your assets against creditors, legal disputes, or judgments against your estate. This trust is irrevocable and allows the trustee to hold your assets to protect t...
Good for: Those wishing to shield assets from a financially irresponsible beneficiary A spendthrift trust is helpful if you believe your heirs will squander their inheritance. 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 from th...
Good for: High-net-worth individuals who want to leave assets to later generations while avoiding estate taxes You can set up a generation-skipping trust if you prefer your estate to go to your grandchildren (or later generations) rather than your children. By transferring the assets to your grandchildren instead of your children, the assets enjoy ...
Good for: Individuals looking to exclude life insurance proceeds from their taxable estate A life insurance trust, often called an irrevocable life insurance trust (ILIT), is designed to hold the proceeds of your life insurance policy. It is irrevocable and allows your life insurance payouts to be invested and distributed by the trustee without inc...
When it comes to estate planning, understanding the different types of trusts is essential. Trusts can be broadly categorized into four main types: living trusts, testamentary trusts, revocable trusts, and irrevocable trusts. Each type serves a unique purpose and offers distinct benefits, so let’s break them down.
Tax efficiency is another key benefit of trusts. Certain trusts offer strategies to minimize estate taxes, preserving more wealth for your heirs. Additionally, income tax planning can be optimized through the strategic use of trusts, depending on the type of trust and assets involved. Asset protection is a crucial consideration in estate planning.
Feb 8, 2024 · Family Trusts: Designed to hold assets for the benefit of family members, family trusts offer potential tax benefits and asset protection, making them a popular choice for estate planning. Testamentary Trusts: A testamentary trust is created as part of a will and only comes into effect upon the settlor’s death. This type of trust is ...
Sep 17, 2024 · A trust is an estate planning entity that holds assets for an individual or organization. A third party, known as the trustee, manages these assets for the benefit of beneficiaries named in the trust. Trusts can hold different assets, such as real estate, land, businesses, cash, bonds, stocks, jewelry, motor vehicles, and other personal property.
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Oct 2, 2024 · Conclusion. Estate trusts are a powerful tool in estate planning, offering benefits like asset protection, tax efficiency, and privacy. They cater to various financial situations, making them accessible to a wide range of individuals. By understanding the different types of trusts and their specific purposes, people can make informed decisions ...
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related to: What types of Trusts offer estate planning benefits?See How Our Private Bank Team Can Help Educate You and Your Family About Trusts. Our Experienced Team Can Help You Create and Navigate the Complexities of a Trust.
