Estate Planning (Trusts)

Trusts are estate-planning mechanisms that usually supplement a Will. However, it may also be used to assist you in managing your property during your lifetime. A trust allows you to dictate who manages your assets and to whom and how your assets will be distributed. There are many reasons to create a trust, making this property distribution technique a popular choice for many people when creating an estate plan. An experienced attorney at Kaminsky, Thomas, Wharton, Lovette & Vigna will be able to explain these reasons to you and will be able to assist you in properly creating a trust that will achieve your purpose. Trust Lingo Settlor/Grantor – the owner of the property to be placed in trust. Trustee – a person or entity that manages the trust property. Beneficiary – a person that benefits from the trust property. Fiduciary Relationship – the trustee must act solely in the best interest of the beneficiaries when making decisions regarding the trust property. Types of Commonly Used Trusts Credit Shelter or By-Pass Trust – created on death to hold and manage assets for your heirs in an amount equal to the unified credit equivalent. BENEFIT: Heirs receive assets free of Federal Estate Tax at a predetermined age.   Irrevocable Living Trust – Created by gift to manage assets you transfer, for beneficiaries you designate. Terms are specified at your discretion. BENEFIT: Keeps trust assets out of your estate if you give up control. Post-gift appreciation is also included.   Revocable Living Trust – Protects and manages your assets in the event of your incapacity. Becomes irrevocable at death and provides for asset distribution. BENEFIT: Helps you avoid probate and gives you privacy.   Insurance Trust – The trust owns life insurance policies on your life. Manages and distributes policy proceeds in accordance with your wishes. BENEFIT: Keeps insurance proceeds out of your estate. Can loan the proceeds to your estate to help it meet liquidity needs.   Charitable Remainder Trust – Holds appreciated property you transfer for the benefit of a charity. Makes annuity payments to you and transfers remainder to the charity at your death. BENEFIT: Gives you an immediate income tax deduction, avoids capital gains tax, provides you with annuity payments, and keeps the transferred property out of your estate.   Qualified Terminal Interest Property Trust (QTIP) – Created at death for the benefit of your spouse and children. Pays all trust income to your spouse for life. Remainder then passes to your children. BENEFIT: Qualifies for the unlimited Federal Estate Tax marital deduction. Gives you complete control over the final disposition of your property. Often used in second marriages to protect the interest of children from a previous marriage.