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3 Types of Trusts Your Estate May Benefit From

You may be dreaming of setting up a living trust once you win the lottery, but you don't have to be rich to benefit from one now. A trust may be a good idea if you have a certain level of assets or have very specific instructions on how you want your estate distributed. Not only will the right type of trust help to protect your assets, they can help you avoid substantial estate taxes and direct how your assets are distributed. Here are a few you may want to consider.

Generation-Skipping Trusts

Have your children done well for themselves and you want to ensure that your assets are available to your grandchildren or great-grandchildren? Do you have an ex-son-in-law or ex-daughter-in-law that is sitting back waiting to attach any assets that you pass on to your child? Do one or more of your children have substantial debt that will eat up the value of your estate? If any of these are true, you may benefit from a generation-skipping trust. 

By setting up a generation-skipping trust, you will be able to bequeath your assets to a future generation without leaving them to your spouse or children. By doing this you will be able to avoid estate or death tax multiple times and protect your assets from being depleted or liquated by your children. 

This type of trust can also be a great choice if you have assets that you anticipate will have significant growth in the future such as stocks, bonds, or real estate. They will be able to grow tax free within the trust.

Qualified Terminable Interest Property Trust

These days it is not unusual to have blended families. There is a possibility of each of you bringing children into the marriage that are not the biological children of your spouse. While these arrangements can work out well, they can often become a legal nightmare if you are trying to leave specific property to your children and not your step-children.

Depending on the state you live in when you die, all your assets will pass to your spouse. When your spouse passes, their biological child or children will be the primary heirs. This can leave your children out in the cold.

A Qualified Terminable Interest Property Trust (QTIP) can allow you to take care of your spouse while ensuring that your property eventually goes to who you designate it for. By placing your assets in the trust and giving your spouse the lifetime rights to the income and/or some of the principal contained within the trust, ensures your spouse will have lifetime income. Once they pass the assets in the trust will be bequeathed to the named beneficiaries.

Irrevocable Life Insurance Trusts

Do you have substantial life insurance? If so, you may benefit from transferring your life insurance policy to an irrevocable non-amendable life insurance trust. Although you will not be able to make any changes to your policy, nor borrow against it once this is done, you may benefit in the long run. 

By placing your policy in a trust, you will able to avoid estate taxes. A trust will also let you dictate how the assets will be distributed at some point in the future. This can be beneficial if there are minor children, or those who may not be financially ready for a large windfall. 

A good trust can be very flexible, yet they can be very complex. Depending on the trust you choose will determine its distinct advantages and disadvantages. The Law Office of Leon A. Karjoia can outline all of these for you and discuss the trust you will benefit the most from. Give us a call today to make an appointment so we can help you get started.