Trust in Trusts: Your Ultimate Roadmap to Safeguarding Your Legacy

Setting up a Trust can be a great first step in ensuring your financial security, estate planning, and the well-being of your loved ones. However, navigating the complicated world of trusts requires expert guidance. The question arises: What is a Trust and how do I know which Trust I need. Our legal experts have many years in navigating the world of Trusts. In this blog, we will explore the different types of Trusts and which one may be best for you.

Revocable Trust (Living Trust)

A revocable trust, also known as a living trust, can be changed or revoked by the trust maker (grantor) during their lifetime. This type of trust allows for the seamless transfer of assets upon the grantor’s death, avoiding probate. However, the assets are still subject to estate taxes.

Irrevocable Medicaid Asset Protection Trust

An irrevocable Medicaid asset protection trust is a legal structure used in estate planning to help individuals qualify for Medicaid while preserving their assets for their beneficiaries.

Medicaid can scrutinize asset transfers made within a certain period before the application for benefits (usually 60 months in most states). Assets transferred to the trust outside this period are safe, but transfers made within this period may lead to a penalty or a period of ineligibility for Medicaid benefits.

Besides Medicaid planning, these trusts can provide estate tax benefits and ensure that assets are distributed according to the grantor’s wishes after death.

Testamentary Trust

A testamentary trust is established through a will and comes into effect only after the death of the person who created the will. This type of trust doesn’t avoid probate or provide the tax advantages that other trusts do.

Charitable Trust

This type of trust is designed to benefit a particular charity or the public good. Charitable Remainder Trusts and Charitable Lead Trusts are two common types, each with unique ways to benefit both the grantor and the charity.

Special Needs Trust

A special needs trust is designed to benefit individuals who are physically or mentally disabled. It ensures that the beneficiaries can still qualify for public assistance while accessing additional funds for expenses not covered by public assistance.

Marital or “A-B” Trust

This trust is designed for married couples and aims to minimize estate taxes. It splits into two upon the death of the first spouse: the marital trust (“A”) and the bypass trust (“B”). Assets in the marital trust are not subject to estate taxes when the first spouse dies.

Credit Shelter Trust

Like an A-B Trust, a credit shelter trust allows the grantor to dictate how assets are distributed after spouses die, using each spouse’s estate tax exemption.

Generation-Skipping Trust

Also known as a Dynasty Trust, this allows the grantor to transfer a substantial amount of assets tax-free to beneficiaries at least two generations of their junior—typically grandchildren.

Qualified Terminable Interest Property (QTIP) Trust

This type of trust is often used in second-marriage scenarios where the grantor wishes to provide for the surviving spouse while preserving the remaining assets for the children from a previous marriage.

Grantor Retained Annuity Trust (GRAT)

The grantor places assets into the trust but receives an annuity for several years. At the end of the period, the remaining assets go to the beneficiaries, often at reduced tax liability.

Life Insurance Trust

A life insurance trust owns your insurance policy, ensuring the death benefit is not included in your taxable estate.

Spendthrift Trust

It protects the trust’s assets from being claimed by beneficiaries’ creditors and restricts the beneficiary’s ability to mismanage funds by giving the trustee full control over distributions.

Crummey Trust

This trust allows for annual gifts to beneficiaries in a way that qualifies for the gift tax exclusion. Beneficiaries have a limited time to withdraw the funds, allowing the assets to grow over time.

Contact Logan & Logan LLP To Build Your Trust On The Shouth Shore, MA

Each type of trust serves different estate planning goals, so it’s important to consult with legal and financial advisors to determine which type is most appropriate for your needs. Logan & Logan LLP is ready to help you secure your future. When you build trust, you are leaving no room for errer. Contact us here to start the Trust building process!

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