Poughkeepsie Irrevocable Trust Attorneys
Millions of individuals and families are beginning to see that establishing a trust is perhaps the best way to protect estate assets from taxes, expenses and delay, while ensuring the money is distributed according to the descendant's wishes.
There are many types of trusts available, and each type offers a very specific tax and distribution benefit for the estate holder. Below is a summary of types of trusts and a basic description of tax benefits available from each. This is not a comprehensive list and the advantages and benefits is not intended to be exhaustive. Contact an attorney at Vergilis, Stenger, Roberts, Davis & Diamond, LLP, to discuss your specific needs.
Most Common Types of Trusts
Living trusts: Set up while the Grantor is living to permit distribution, after death without court intervention, commonly referred to as "avoiding probate". Living trusts may be established as irrevocable, meaning the terms (typically) cannot be changed or assets returned to the Grantor; or revocable, meaning the Grantor continues to maintain control over the assets and can withdraw the funds, upon significant tax consequences.
Testamentary trusts: Established by a will, to take effect upon probate of the will, to control the timing and amount of distribution of assets.
Revocable trusts: The creator of the trust maintains control during their lifetime.
Irrevocable trusts: Assets in the trust are permanently removed from the assets of the creator. Assets may be taxed upon distribution created for various protection purposes.
Charitable trusts: Set up with the intent to distribute assets to a non-profit organization(s) of the estate-holder's choice. The money used to fund the trust is non-taxable in the year of funding and distributions to the 501(c)3 organizations are not taxed as income. Trustees are required by law to distribute the assets in exact accordance with the trust owner's instructions. Charitable trusts can be established as living trusts, or testamentary trusts.
Types of charitable trusts include:
- Charitable lead trusts: Income from the trust is distributed at least annually to the designated non-profit organization for a pre-determined term. Principal assets remaining in the trust at the end of the term following distribution are transferred to designated beneficiary(ies), such as family members, and taxed as income.
- Charitable remainder annuity trusts (CRAT): Set up to guarantee a fixed annual interest of five percent or more to be paid to the Grantor or other persons designated by the Grantor either for life or for a specific term not to exceed twenty years. Upon the end of the term the principle is distributed to one or more charitable organizations.
- Charitable remainder unitrust (CRUT): Funded to pay a fixed annual percentage of at least five percent of the value of the trust as determined on the first day of each tax year of the trust and paid to the Grantor. The distribution is similar to the charitable remainder annuity trust. The trust assets are revalued annually.
Asset protection trusts: Set up to protect estate assets from creditors, upon the death of an estate holder. The parameters of asset protection trusts are currently under federal scrutiny.
Special needs trusts: Established for the specific purpose of distributing assets for the care and maintenance of a loved one with a special need. These may be revocable or irrevocable trusts, often set up to supplement the care provided for the by the state in a manner that does not cause the loss of government benefits.
Spendthrift trusts: Set up in such a way as to prevent the beneficiaries from spending down the assets for reasons other than those allowed by the terms set forth by the trust owner, while alive or after death.
Qualified personal residence trusts (QPRT): Reduces the value of the Grantor's house for federal and state estate tax purposes upon the death of the Grantor. The house is transferred into an irrevocable living trust and the Grantor reserves the right to live in the home for a set period. Upon expiration of that period, the house is distributed to the remainder beneficiaries.
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Our estate planning attorneys are ready to help you meet all of your estate tax and asset preservation needs. You will work directly with your lawyer, while confident in the knowledge that your attorney can count on the support and knowledge of a team of experienced estate planning and probate professionals. Learn more about what types of trusts will work best for your family's circumstances. Contact us to arrange a consultation with a New York estate planning attorney.
