Trusts
Some more popular trusts include:
Revocable Trusts:
Can offer professional asset management and avoidance of probate, while you retain full control over the assets. Revocable Trusts, also called Living Trusts, can be used for better management and control of assets during life and at death. Because the trusts are revocable, the grantor is not committed to the trust if the situation changes.
A Credit Shelter Trust:
This allows a married couple to minimize their estate taxes while still allowing the surviving spouse to have access to the entire estate.
Qualified Terminable Interest Property (QTIP):
QTIPs allow you to make your assets available to your surviving spouse and yet still allow you to control the disposition of the assets upon the second death. The unlimited marital deduction is often used to reduce taxes at first death. By using the unlimited marital deduction, assets are placed into the estate of the survivor, along with control of the ultimate disposition of those assets. For many couples, this is not an issue. But for some people, the disposition of the assets upon the second death could be a sensitive issue. Consider a marriage where one spouse is in a second marriage and has children from both the second marriage and the prior marriage. If the first to die is the individual with two families, and he/ she leaves all assets to the surviving spouse via the unlimited marital deduction, the surviving spouse may then leave all assets at his/her death to the second family and disinherit the first family. A QTIP solves this dilemma.
An Irrevocable Life Insurance Trust (ILIT):
An Irrevocable Life Insurance Trust (ILIT) creates a pool of money outside of the estate to offset estate taxes and provide more efficient wealth transfer between generations.
An ILIT is a very popular estate-planning tool designed to own life insurance outside the estate of the grantor(s). The trust makes life insurance death benefits available to pay estate taxes. This way, valuable estate assets do not need to be liquidated to generate cash, and family wealth is not eroded.
A Dynasty Trust:
A dynasty trust is designed to avoid or minimize estate taxes being applied to great family wealth with each transfer to subsequent generations.
Dynasty trusts are a very popular planning technique for large estates. By holding assets in the trust and making well-defined distributions to each generation, the entire wealth of the trust is not subject to estate taxes with the passage of each generation. Dynasty trusts in the United States are the combined result of the imposition of the generation-skipping transfer tax (GSTT) upon trusts that attempted to bypass transferring all assets to children, and the repeal of the rule against perpetuities by states attempting to attract the great wealth of such trusts.