Trusts are arguably one of the most useful and versatile documents a person can add to an estate plan. They offer creative solutions to money management while offering efficient ways to provide for one’s heirs. Most New York residents have heard a great deal about trust categories such as a revocable living trust or a testamentary trust. However, there exist under these trust types a veritable plethora of solutions to choose from in most American locations. By educating yourself about some of these legal documents, you can plan for any unique circumstances that may apply to you and your family.
Listed below are just a few types of trusts you may have never heard of before.
Crummey trust: It sounds terrible, but this kind of life insurance trust is a way to reduce annual gift taxes. The document contains provisions allowing gifts made to the trust to become eligible for tax exclusions.
Spendthrift trust: For those who worry about their heirs wasting an inheritance, this kind of trust may be the solution. It gives the trustee freedom to avoid handing out distributions if they would be wasted or spent on creditors.
By-pass trust: Essentially, this is a credit shelter trust as it provides a way to keep property safe from federal estate taxation. It is best to seek advice from a lawyer about how this type of trust works.
Totten trust: Simple yet effective, a totten trust allows the grantor to deposit funds into an account for another party. The grantor serves as the trustee for the account which will pass on to the other party after the grantor’s death.
You can learn more about the types of trusts available to New York citizens by consulting with an estate planning attorney in your area.
Source: Living Trust Network, “Types of Trusts,” accessed April 29, 2016