Types of Revocable Living Trusts
are various types of revocable living trusts and which you choose
depends upon your situation.
Single Trust is generally for an unmarried person. A married person
who owns assets apart from their spouse can also have a single trust
for personal assets which they do not own together as married partners.
This is not uncommon where a spouse may have been previously married
with children from that marriage. A single trust for an unmarried
person can also be a standing "prenuptial" plan prior
to a later marriage, as well. Were there to be a later divorce,
assets in such a trust would be exempt from property divisions of
the later marriage.
Marital Trust is for a married couple with an estate which will
probably not face any future estate tax problems (ie. the smaller
estate). Both husband and wife are the Trustors-Trustees-Trust Beneficiaries.
After the first dies, the surviving spouse can then do as he or
she pleases with the estate and its assets.
A/B Trust is also called a "marital by-pass trust." It
is one unified trust which divideds into two trusts when the first
spouse dies. At the death of the first spouse, the surviving spouse
transfers to the "B" trust as much of the estate as he
or she pleases. Usually this is equal to the Uniform Tax Credit
amount for the year of the death of the spouse. The balance of the
estate is held in the surviving spouse's "A" trust. The
surviving spouse can do as they please with the assets in their
trust. The "B": trust assets are held for the designated
heirs of the estate and may not be so liberally used. If the "B"
trust creates any income, it can go to the surviving spouse (such
as real estate rental income, etc.). In certain, limited instances,
the surviving spouse can "invade" the "B" trust
principal. This is usually limited to major medical necessity.
Q-TIP Trust is the Qualified Terminable Interest Property trust.
Similar to an A/B trust, this divides into 3 trusts. One is for
the wife, one is for the husband, and the other is for special uses.
One special use is to receive the stock for a closely held corporation
(ie. a "C" Corp.). From this the stock can be distributed
to a number of beneficiaries. This may not normally be permitted
for some corporations where the stock canot be sub-divided among
several heirs. It can also be an excellent vehicle in the blended
marriage where the husband and wife have children each form previous
marriages as well as children together. It is a kind of "yours,
mine, and ours" trust arrangement.
Q-DOT Trust is a Qualified Domestic Trust which is necessary if
one spouse is not a U.S. citizen. This trust requires a U.S. citizen
to be the trustee but also provides major estate tax relief to the
non-U.S. citizen spouse. Without this, an international marriage
can face unexpected and immediate negative estate tax consequences
if the U.S. citizen spouse pre-deceases the non-U.S. citizen spouse.
The "Special Needs" Trust can be an addition to any of
the above-mentioned trusts. It is not uncommon for a family to include
a developmentally disabled person who is receiving government benefits.
Were they to also receive an inheritance their benefits may be suspended.
A special needs trust allows their intended inheritance to be held
in trust with another person as the trustee and the government benefits
remain uninterrupted. Assets from this trust can be liberally used
to benefit the disabled beneficiary.