John Bullis: Which type of trust is best for you?

There are many different types of trusts. If you meet with an estate planning attorney, you will be more likely to choose the type of trust that best meets your goals, desires and situation. The most popular trust is a grantor (also known as living) trust. That is a title holding type trust that does not have the court overview and administration — it avoids probate. You can put items into the grantor trust or pull them out. You can easily change the distributions to beneficiaries and, if you like, even revoke the trust.

A special needs trust is usually for a beneficiary that is getting or likely to get some government benefits (welfare) or has a medical condition that requires some assistance the government does not provide.

An incentive trust is used to require the beneficiaries (or just one of them) to do certain actions to receive their distributions. An example is the requirement the beneficiary earns wages of some amount (you choose) to be eligible for a distribution. Another example is if the beneficiary completes a particular kind of education, then he or she can get a distribution of some amount.

A charitable trust provides some benefits to your favorite charity for part of the total assets in the trust. There are several types of this trust that also provides for benefits to you or your chosen individuals as well as the charity. A meeting with your attorney will help you decide if this type of trust will meet your goals and desires.

There is no death tax if an individual dies this year and leaves behind less than $11,400,000 (and did not make big, taxable gifts while living). That means the old “A-B” trust in which the assets of the first spouse to die puts those assets in a fixed, irrevocable trust might not be best. The income is to be paid out each year, usually to the surviving spouse and if necessary some of the principal can also be paid out. At the death of the surviving spouse, what is in the first trust is distributed according to the terms and provisions of the first trust.

Most of us do not need this complicated “A-B” type of trust anymore with the very big death tax exemption (allowance). Maybe instead it is best to just leave the assets at death to the surviving spouse (or others). There can be special provisions used to meet your goals and desires.

If you inherit significant assets (or receive them by gift) and want to preserve the separate ownership of those assets, a trust might be a help. However you need to be careful to maintain the separate ownership during your lifetime.

Why not meet with your attorney and consider the various types of trust you prefer?

Did you hear, “Living is more a question of what one spends than what one makes”?

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.


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