Legal trusts have become one of the most common ways to protect an estate. You can shield and distribute assets according to the wishes of the settlor (creator of the trust) and ensure the longevity of a business. In a previous article, we mentioned 3 common types of legal trusts. They included the Qualified Personal Residence Trust (QPRT), the Credit Haven Trust (also known as the Family Trust), and the Dynasty Trust. Given the settler’s goals, each of these could be used for different purposes. Below we will describe 3 most common types of legal trusts that you should consider.
#1 – Irrevocable Life Insurance Trust
Increasingly common among those who own businesses or other high-value assets that cannot be quickly liquidated, the irrevocable life insurance trust uses your life insurance policy to pay the costs of your estate. Business owners generally do not want their heirs to have to sell the business to pay for estate costs. Liquidation in these circumstances can have a significant impact on the value of the business. Instead, the settler’s life insurance policy is used to pay the estate costs that are associated with the business.
#2 – Special Needs Trust
When a person receives financial support from the government, those benefits may be disqualified if that person inherits a large sum or receives a sizeable gift. To ensure that those benefits are not compromised, a special needs trust can be established. Any gift or inheritance can be placed into the trust. An experienced attorney will often include a special provision within this type of trust. The provision may cause the trust to lapse if the beneficiary’s government benefits are ever subject to disqualification.
#3 – Qualified Terminating Interest Property Trust
Your family may include people who are members by virtue of divorces and remarriages. In some cases, you may want to ensure that certain relatives receive the bulk of your estate. Many people use a qualified terminating interest property trust when they have children and marry someone who has children of their own. This type of trust can be established to ensure that your assets are passed on to your biological children when your spouse dies. By doing so, they can eliminate the possibility of someone else’s children receiving a portion of your estate.
Why should you hire a lawyer?
If your estate is worth a substantial amount, you should retain an attorney who is qualified to offer estate planning advice. A good attorney can help you create the right type of trust for your unique circumstances. He can review your goals with you and create the type of trust that will best protect your estate. He can offer legal advice that will help you establish provisions and conditions that address how the trust distributes your assets after your death. Creating a trust for your estate deserves the attention of a trained legal professional.