Trusts offer great flexibility for estate planning. Many clients have worked hard their entire lifetime to accumulate their wealth, and they do not want their children or grandchildren, who may not have the same skills in managing money to squander it irresponsibility. Thus, many clients choose to leave gifts to their children and grandchildren in trust, thereby ensuring that the money is properly managed and protected from the spouses and creditors of the beneficiaries. There are many different kinds of trusts in an estate-planner’s toolbox. Here is a brief description of a few of them.
- Spendthrift Trust: This trust allows you to protect a beneficiary from his own bad habits. This trust offers protection of the beneficiary from the beneficiary’s own spouses or creditors.
- Contingent Minor's Trust: If there is any contingency under a Will by which property is distributable to a person who would be considered a minor under applicable state law, then the property instead is distributed to a trustee to hold for the benefit of the minor in accordance with the terms of the trust. The use of a contingent minor’s trust will obviate the need for the court exercising probate jurisdiction to appoint a guardian for the minor’s estate.
- Bypass Trust: For large estates (exceeding $5,000,000 in value), a bypass trust can still be a useful tool to reduce or eliminate the need to file an estate-tax return and to pay an estate tax, despite the current tax laws which provide for the portability of the deceased spouse’s unused exemption amount.
- Marital Trust: A marital trust, also called a Qualified Terminable Interest (Q-TIP) Trust, allows a deceased spouse to transfer money to his surviving spouse at death which qualifies for the marital deduction, but still retain some degree of control over the money “from beyond the grave.”
- Qualified Domestic Trust: The use of this trust allows a resident alien to obtain a partial benefit of the marital deduction.