When you begin planning your estate, you might feel overwhelmed by all of the options for different types of trusts and wills. This is understandable — there are many, and the specifications of each are important to pay attention to. According to Forbes, 51 percent of Americans between 55 and 64 have failed to draft a will. Estate planning is hardly a one-size-fits-all endeavor, but it is important nonetheless.
In fact, it is a highly individual decision that should be made based on an assessment of your family’s unique needs. This is why many people choose to invest in legal assistance when they are planning their estate. You can start by familiarizing yourself with the following types of trusts and their potential impact on your family.
Marital trusts are some of the most common estate plans employed by married persons. This might also be called an A-trust, and it typically functions to provide for both your spouse and your children by placing property in a marital trust. It is therefore eligible for a marital deduction in estate taxes, but the assets therein cannot be distributed for reasons you do not authorize.
Irrevocable life insurance trusts
If you have an abundance of assets in your estate, an irrevocable life insurance trust might be a suitable option for you. In this type of plan, proceeds from a decedent’s life insurance plan are exempt from estate taxation.
Qualified domestic trust
If you are trying to plan an estate and your spouse is not a citizen, you will certainly have some challenges to contend with. A qualified domestic trust, however, is one way to address some of these hindrances. In it, you can afford a non-citizen spouse the same marital deductions normally expected. It also entitles the spouse to all assets and income held in the trust.
It is advisable to speak to an attorney to learn what type of trust is right for you.