Commonly Used Trusts

Type

Purpose

Benefits

Credit shelter or Bypass Trust

Created at death to hold and manage assets for your heirs in an amount equal to the estate tax exemption.

Distributes assets free of estate tax to heirs at a predetermined age.

Irrevocable Living Trust

Created by gifts to manage assets you transfer, for beneficiaries you designate. Terms are specified at your discretion.

Keeps trust assets out of your estate if you give up all control. Post-gift appreciation is also excluded. Can be set up so that you pay the taxes on trust income, maximizing the amount available to beneficiaries.

Revocable Living Trust

Protects and manages your assets in the event of your incapacity. Becomes irrevocable at death and provides for asset distribution.

Helps you avoid probate and preserve privacy.

Insurance Trust

Owns life insurance policies on your life. Manages and distributes policy proceeds in accordance with your wishes.

Keeps insurance proceeds out of your estate. Can loan proceeds to your estate to help meet liquidity needs, such as to pay estate tax.

Charitable Remainder Trust

Holds appreciated property you transfer for the benefit of a charity. Makes annuity payments to you (or other beneficiaries) and transfers any remainder to the charity at your death.

Gives you an immediate income tax deduction, avoids capital gains tax, provides you with annuity payments, and keeps the transferred property out of your estate.

QTIP (Qualified Terminable Interest Property) Trust

Created at death for the benefit of your spouse and children. Pays all trust income to your spouse for life. Remainder then passes to your children.

Qualifies for the unlimited estate tax marital deduction. Gives you complete control over the final disposition of your property. Often used in second marriages to protect interest of children from a previous marriage.