Establishing a trust is one of the most effective methods of managing one’s assets, while also shielding property from creditors and excessive taxation. However, there are a number of different types of trusts, each of which comes with its own benefits and drawbacks, so if you are planning your estate and have questions about whether establishing a trust is right for you, it’s critical to let Alan G. Orlowsky walk you through your options.
Living Trusts
Individuals who want to put their assets into a trust while they’re alive, but who want those assets transferred once they have passed away, may want to consider creating a living trust, which help trustors:
● Protect assets from being wasted due to incapacity or incompetency;
● Reduce the chances their estate will be contested;
● Place the responsibility for managing their assets into the hands of a trusted third party; and
● Keep their business running without disruption in the event of disability or an untimely death.
Living trusts can be either revocable or irrevocable, with the former referring to a trust that can be changed, altered, or terminated by the trustor. The terms of the latter, on the other hand, cannot be changed, even during the trustor’s lifetime.
Although establishing a revocable trust (and a living trust in particular) can help keep a person’s assets out of probate, the estate in question could still end up being taxed if its assets are valuable enough.
Testamentary Trusts
Testamentary trusts are created for the benefit of a beneficiary and are often instituted by an executor after a trustor dies. This individual will then be responsible for managing the trust for a person’s descendants. However, it’s important to note, testamentary trusts are irrevocable, which means once they are created, the assets placed into that trust will no longer be in the trustor’s control. This often proves to be a good option for those who are looking for complete protection from creditors, want to avoid the probate process, and want to be shielded from estate taxes.
Credit Shelter Trusts
Credit shelter trusts are a type of trust fund that allows individuals to grant recipients a certain amount of funds (up to the estate tax exemption limit). This in turn, means that trustors can essentially leave the remainder of their assets to a spouse or family member tax free. These trusts allow for growth but will remain tax free no matter how large they become.
Qualified Terminable Interest Property Trust
Qualified terminable interest property trusts allow trustors to allot certain assets to various beneficiaries at different times, often in accordance with the wishes of a surviving spouse. If, for instance, a person left the bulk of his estate to his wife in a qualified terminable interest property trust, she would be permitted to use the assets as she saw fit until her death, at which point, anything left over in the estate would be given to the trustor’s children.
Contact Our Chicagoland Estate Planning Legal Team
These are only a few of the different trust-related options that estate planners have, so if you are considering establishing a trust for your own loved ones, please call Alan G. Orlowsky at 847-325-5559 today to speak with an experienced estate planning lawyer about what would be best for you.
