There are many benefits to establishing a trust. As you go through the process of creating an estate plan, it's imperative to learn more about each type of trust. This includes those that are often overlooked.
There are many reasons to use a trust, including the ability to control how your assets are distributed upon your death. Along with this, it can help reduce estate taxes while also providing a higher level of privacy.
With all this in mind, you'll want to learn more about each type of trust. While an irrevocable and revocable trust are most common, there are others to consider:
-- Credit shelter trust. Also known as a family trust, this gives you the opportunity to pass some of your estate to your spouse in a tax-free manner.
-- Generation skipping trust. Are you interested in transferring assets to a future generation? In this case, a generation skipping trust may work for you. This allows you to transfer a substantial sum of money tax-free to someone who is a minimum of two generations younger.
-- Irrevocable life insurance trust. This allows you to remove your life insurance policy from your taxable estate. Subsequently, it can be used to pay estate costs while also providing your beneficiaries with cash for other expenses upon your death.
Creating an estate plan can be a detailed process. If you learn more about each type of trust, and discuss them with your legal and financial team, you can make decisions that will best suit you and your family.
Source: CNN, "Estate planning: Types of trusts," accessed Dec. 29, 2016