Understanding Different Kinds Of Trusts
Trusts are useful estate planning tools that can accomplish a variety of goals. They can help avoid probate, minimize taxes, and be used to give property to minor or disabled loved ones. Trusts can be created during a person’s lifetime (Living Trusts) or at the person’s death (Testamentary Trusts). Some different types of Trusts from both categories are discussed below.
A person can transfer their assets to a Living Trust and, as trustee, continue using their assets as they always have. If the Trust is revocable, the person can amend or terminate the Trust. If they become incapacitated or die, the successor trustee of their choice will continue to manage their assets the same way and will distribute the property remaining in the Trust at their death to whomever they choose without the need for court involvement.
Tax Planning Trusts
Several different types of Living Trusts provide flexible alternatives for minimizing capital gains and estate taxes, including the Charitable Remainder Trust (CRT), Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Grantor Retained Annuity Trust (GRAT), and Grantor Retained Unitrust (GRUT). The specific type of Trust involved determines how it is funded, used during the person’s lifetime, and distributed at the person’s death.
A person can create a Trust under a Will, called a Testamentary Trust, which does not take effect until they are deceased. A Will can contain a Marital or Family Trust for tax planning. A person can also create a Testamentary Trust for the support and education of a beneficiary who is a minor. Finally, a person can create a Testamentary Special Needs Trust (TSNT) for a disabled beneficiary to pay for special needs that are not covered by public benefits programs, without affecting the beneficiary’s eligibility for programs like Medicaid.
A Disability Trust is a type of Living Trust that allows a disabled person under the age of 65 to use her own assets for her special needs, other than food and shelter, and keep public benefits, such as Medicaid and Supplemental Security Income (SSI). The Trust can be established by the person’s parent, grandparent, legal guardian, or a court. If there are any funds remaining in the Trust at the person’s death or when they no longer require medical assistance from the state, those funds must be used to pay back the state medical assistance program up to the amount of assistance provided for the person.
Similar to a Disability Trust, a Third-Party Discretionary Trust (TPDT) allows people to give money to a disabled person without jeopardizing the person’s Medicaid or SSI. The difference is that the assets remaining in the TPDT at the beneficiary’s death do not have to be paid back to the state medical assistance program. Instead, they are distributed however the person who created the trust desires.
Contact A Colorado Living Trust Attorney
These are just a few of the Trusts that can assist in accomplishing specific estate planning goals, including minimizing taxes, qualifying for public benefits, or avoiding probate administration. Trust planning can be complex. An attorney at can help you choose the right kind of Trust to meet your needs.