TRUSTS

 

If used correctly, trusts provide flexibility and control over your

 assets when you die.  Since I began to practice law in 1988, I have

 used trusts in a variety of situations, such as the following:

   

   1.       Credit Shelter Trust (A-B Trust):           This trust enables you to utilize

     your exemption from estate tax, which is $2 million for 2008.   So the first

     $2 million of your assets avoid estate tax.  However, you must include

     language in your Will in order to utilize this exemption.

 

 

2.   QTIP Trust (Qualified Terminable Interest Property):      You are able to

 

 control the remainder of your assets in excess of your exemption by

 

 transferring them to this trust.  This trust may be beneficial where an

 

 individual has multiple marriages or where a surviving spouse has

 

 limited financial experience and  a trustee will be appointed for the

 

 surviving spouse’s benefit.

 

 

3.    QDOT Trust (Qualified Domestic Trust):           If one or both spouses are

 

 not US citizens, the rules are different.  A QDOT allows for assets to be held

 

 in trust for the noncitizen spouse without incurring an estate tax, thereby

 

 deferring the tax until the spouse's death or the assets are withdrawn. 

 

 Technical requirements must be satisfied in order for a surviving

 

 noncitizen spouse to use the unlimited marital deduction.

 

 

4.     Disclaimer Trust: A disclaimer is the refusal to accept benefits conferred

 

 by will or by operation of law.  A disclaimer enables a surviving spouse to

 

 transfer assets to the trust by disclaiming ownership in those assets. 

 

 Disclaimed property is transferred to the trust without being taxed.

 

 

5.     See-Through Trust:    If the trust qualifies as a "see-through trust," the IRS

 

 permits the use of the oldest trust beneficiary's life expectancy for

 

 purposes of required minimum distributions. This is especially beneficial

 

 when the trust is for minor children. Since they most likely are

 

 significantly younger than you, they can benefit from a much longer

 

 applicable distribution period.  Indeed,   they have the potential for

 

 decades of tax-free growth of your assets.

 

 

 6.   Irrevocable Life Insurance Trust:       An irrevocable life insurance trust is

 

 created to own life insurance so that the benefit paid upon the death of

 

 the insured in not included in the insured’s estate and therefore avoids

 

 estate taxation.

 

 

  7.     Special Needs Trust (Supplemental Needs Trust):        This trust enables an

 

 individual with a mental or physical disability to have assets held in trust

 

 for his or her benefit.  This trust provides for supplemental and extra care

 

 over and above that which the government provides.  Monies held  by the

 

 trust are a noncountable resource and allow the disabled individual to

 

 qualify for available benefits and programs.

     

    8.  Living Trust (Revocable Trust):     The two most often-cited

     advantages of a living trust are its role in the event of the grantor’s

     incapacity and the avoidance of probate upon the grantor’s death.   The

     living trust typically provides that in the event of the grantor’s incapacity,

     a successor beneficiary automatically takes over the administration

     of trust property, thereby avoiding  public guardianship proceedings.

 

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