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Education
Will – A document that controls the flow of your personal property, including jewelry, family heirlooms and assets held in your name only. It does not control what passes by beneficiary designation
(including life insurance, IRAs, retirement plans or transfer on death agreement),
what passes by contract (including joint tenancy with rights of survivorship) or
what passes by trust.
Trust – A separate entity that holds property for the benefit of either the grantor – or creator – of the trust or his or her heirs. A trustee manages the assets placed in the trust and ensures the terms of the trust are followed.
Trustee – A person who holds title to assets that will be used for the benefit of someone else. When choosing a trustee, look for someone who is financially capable, responsible and sensitive to your family’s needs.
Living Trust – A trust established while you are alive. You can declare yourself the trustee until you no longer are able to act on your own behalf. You can set standards for determining capacity: for example, your doctor and your spouse must agree you are unable to act. Assets must be retitled in the name of your living trust. At your death, any assets in the living trust do not have to go through probate.
Testamentary Trust – This is the opposite of a Living Trust. It is not established until after your death. Your will typically includes language to establish these trusts at your death.
Marital Trust – Also known as an “A” trust, the marital trust provides management for assets passed to your spouse. The alternative is to leave assets for your spouse outright with no trust. A trust can add a level of comfort that someone is available to manage the assets. If no restrictions are placed on what happens to the assets at the second death, it is called a general power of appointment. If you choose to control what happens at the second death, you need to establish a Qualified Terminable Interest Property Trust, or QTIP, Trust, which is a stricter form of marital trust.
QTIP Trust – Often used in second marriages where children are involved, a QTIP Trust allows the trust creator to determine where his or her assets ultimately will go after the second spouse dies.
Family Trust – Also known as a “B” trust, or
"credit-equivalent trust", the family trust is funded with up to the maximum assets that can pass
tax free. The current amount is $1,000,000. These assets are taxed at death. However, since each person has a unified credit, no tax actually is due. Once these assets have been taxed – with no tax due – they are free to grow to any amount and will never be taxed again for estate-tax purposes.
Qualified Domestic Trust – A type of trust that can be established for the benefit of a non-U.S. citizen spouse to help defer estate taxes to a future date.
Special Needs Trust – A type of trust that can be set up for a disabled person. By specifying the assets are to be used only for “luxuries” and not basic care, the trust allows a disabled person to continue being eligible for government-sponsored financial aid.
Charitable Remainder Trust – A trust established to ultimately benefit a qualified charity. These types of trusts can be set up so the grantor, or creator, receives a stream of income during his or her lifetime. At the grantor’s death, the balance of the trust passes to the charity tax-free. When you set up a charitable remainder trust, you get the benefit of a current tax deduction.
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