3 trust types you might find helpful for your estate plan

On Behalf of | Jan 2, 2024 | Estate Planning |

Trusts are versatile legal instruments used in estate planning. Each of these are tailored to meet specific needs and goals. They can pass down assets to beneficiaries without having to go through probate court. 

There are many different types of trusts. These three trusts are some that many might find useful as part of a comprehensive estate plan:

Special needs trusts

Special needs trusts benefit individuals with disabilities without jeopardizing their eligibility for government assistance, like Medicaid or Supplemental Security Income. The trust owns assets on behalf of the beneficiary and covers expenses that enhance the beneficiary’s quality of life, such as education, recreation, counseling and medical attention beyond the basics covered by government programs. 

Charitable remainder trusts

Charitable remainder trusts are a way to support charitable causes while also providing financial benefits to the trust’s creator or other designated individuals. In this trust, the creator places assets into the trust. They are then used to provide income to the beneficiary for a set period. The remaining assets go to a designated charity after this period or upon the beneficiary’s death.

Bypass trusts

Also known as AB trusts, bypass trusts are used by married couples to reduce estate taxes. When the first spouse dies, a portion of their estate goes into the trust, using up their estate tax exemption. The remaining spouse can benefit from the trust during their lifetime, but the trust retains ownership of the assets. When the second spouse passes away, the assets in the bypass trust aren’t included in their estate for tax purposes. It’s a strategic way to pass more wealth to heirs while minimizing estate tax exposure.

These trusts are only part of a comprehensive estate plan. Anyone who’s creating an estate plan should ensure they work with someone who can help them determine how to make their estate wishes a reality.