When you are planning your estate, you may want to consider leaving some of your assets in an irrevocable trust. Trusts are designed for many purposes, two of which include reducing taxes and protecting your property. While there are dozens of irrevocable trusts to choose from, the following are some of the most commonly used in estate planning:
One way for a spouse to reduce the amount of estate taxes owed when the other spouse passes away uses a bypass trust. After death, his or her property will go into the irrevocable trust that the living spouse may use. The difference is that while he or she can still use the assets, they never own them. When the second spouse passes away, that property is not in his or her own estate. The assets will then go to the next beneficiary named in the trust.
Generation Skipping Trust
A generation skipping trust is made to reduce real estate taxes for those with a lot of money and assets. The final beneficiary will be a grandchild or a set of grandchildren of the person who passes away. His or her child or children will never own the assets, but they may be an income beneficiary. This provides that the trust property is not subject to real estate tax once the child or children pass away.
A spendthrift trust will allow you to control the gifts that you give to someone who may not be able to manage money properly. You can place assets into the trust and name a trustee to disburse money to the beneficiary. The beneficiary will not be able to access the trust without the trustee so that it cannot be squandered.
Special Needs Trust
A special needs trust is designed to provide financial support to a beneficiary that has special needs. The goal of this type of trust is to not affect his or her qualifications for any government entitlements or benefits. The assets are placed into the trust by a parent or relative. The terms of the trust will allow the trustee to use the money to buy whatever the beneficiary needs. However, the beneficiary will never officially own the assets in the trust, thus preventing problems when they need to apply for government assistance or benefits.
When you are planning out your estate and you have special wishes for your assets, using a trust is the best way to go. Contact a firm like Thomason & Hessmer to learn more.