Advanced Estate Planning

Educational Trusts:

Educational trusts can be created to help beneficiaries pay for college or other schooling. However, there are now many tax-advantaged educational accounts to pay tuition and other school-related costs for young people that do not require an educational trust.

Spendthrift Trusts:

A spendthrift trust is designed to minimize an unreliable beneficiary’s ability to squander trust assets. The spendthrift beneficiary is usually someone who has no head for money and is likely to waste the money provided for them if controls are not placed on his right to access it. A spendthrift trust is an attempt to balance concern for the beneficiary with a realistic appraisal of his more wasteful or destructive impulses.

A-B Trusts:

Married couples who are concerned that their combined estate may be subject to an estate tax may want to use an A-B trust. A-B trusts should be considered when a couple wants the surviving spouse to have access to the decedent’s property, but they don’t want the survivor to become the legal owner of the property because of the heavy estate tax burden that may be due when the surviving spouse dies. You can achieve this with an A-B trust.

Bypass Trusts:

When utilizing a bypass trust, you write a will in which you bequeath an amount up to but not exceeding the estate-tax exemption to the bypass trust. You then pass the rest of your estate to your spouse tax-free. And there’s an added bonus: Once money is placed in a bypass trust, it is forever free of estate tax, even if it grows.

Generation Skipping Trusts:

Generation skipping trusts allow you to transfer a substantial amount of money tax-free to beneficiaries who are at least two generations your junior, typically your grandchildren.

Qualified Personal Residence Trusts (QPRT):

A qualified personal residence trust (QPRT) is funded with only your personal residence and nothing else. You put your residence into a trust for a set period of time, usually about 10 years. Your retained “income interest” during the term is the right to live in the residence. When the term of the trust ends, the property goes to the final beneficiary you named in the original trust document. In order to obtain your goal, the trick is to outlive the term of the trust. If you don’t survive the term of the trust, the full current value of the house is included in your taxable estate and your attempt at the reduced-value gift fails.

Qualified Terminable Interest Trusts (QTIP): The basic purposes of a QTIP trust are:

• To postpone taxes on the estate of the first spouse to die until the second spouse dies;
• To leave money and property for the use of the surviving spouse;
• To name final beneficiaries to receive the trust property at the death at the surviving spouse, and;
• To allow for some after-death flexibility.