North-Valley-Investment-Partners-Financial-Services-Retirement-Planning-Real-Estate-Trusts-Ohio
Trust & Estate Planning Strategies

Trust & Estate Planning Strategies

Reviewing your benefits and advantages

North Valley Investment Partners hold high-level discussions with clients on the potential benefits of a trust and why they may or may not need one based on a number of factors. These conversations cover the types of trusts that might fit a client’s family needs and the potential benefits of an individual trustee versus a corporate trustee.

Our team can work with many different trustees in order to satisfy our clients’ comforts and concerns. We also regularly interact with clients’ attorneys on their estate plans to ensure that proper documentation is in place.

North Valley Investment Partners does not provide legal or tax advice. We suggest that you discuss your specific situation with a qualified legal or tax advisor.

The use of a trust can have many purposes. Generally, the answer is to minimize estate taxes and to control assets beyond your death. Practically those purposes are found in:

  • Making sure a spouse is provided for properly after the death of the first spouse
  • Ensure that assets go to the next generation as intended. Particularly when children are not from the most recent marriage.
  • Provide for a loved one who does not have the capacity to handle money.
  • Create a family legacy for charitable purposes.

Doing all of this while striving to be as tax efficient as possible.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

Estate Planning Trusts

The following trust types are used in a typical estate planning case and for which more complicated or exotic trusts are based.

Revocable Living Trust or Inter Vivos Trust.

The inter vivos trust, also called a revocable living trust, is often established to avoid the probate process, and make sure that assets go to the trust grantor (creator) intended recipients without a lengthy court process after the grantor’s death. Typically, the revocable living trust is the “mothership” containing many subtrusts.

Grantor Trust.

The Grantor Trust is the individual who has initiated the trust in order to transfer property to another person or business entity for purposes of avoiding probate, taxes, or other complications stemming from the disposal of assets.

Irrevocable Living Trust.

These trusts cannot be revoked and take effect during the life of the grantor. Usually made to transfer wealth, protect assets, or reduce taxes.

Once assets are transferred to the trust, they no longer belong to the grantor, rather, they become the legal property of the trustee to hold for the beneficiaries. This means that the grantor's future creditors cannot place a lien on assets transferred to the trust because those assets no longer belong to the grantor.

Testamentary Trust.

The testamentary trust is created through explicit instructions in the will of a deceased individual. This type of irrevocable trust is used to leave assets to a beneficiary but only at a specified time, and take effect upon the grantor’s death. This trust does not avoid probate – it actually needs probate to take effect.

Minor’s Trust.

The Minor’s Trust passes assets to a child and provides for management of those assets until the child reaches a certain age that the trust creator specifies, when he or she assumes full control of the assets. This trust avoids expensive guardianship proceedings needed to manage the assets the child inherits before he or she turns 18 years old. This arrangement holds all assets in the trust secure for the minor child, since the grantor receives no income from the trust’s assets.

Spendthrift Trust.

These trusts allow trustees to manage the assets in a trust for the welfare of the recipient of the trust. Spendthrift Trusts allow parents to establish a trust with separate features to accommodate the unique needs of each child, while a Spendthrift Trust, or a trust with a spendthrift clause, protects the trust’s assets from being claimed by creditors and allows the assets to be managed by an independent trustee.

Discretionary Trust.

In discretionary trusts the beneficiaries and assets are not fixed, but determined by criteria established in a trust instrument and administered at the discretion of the trustees, who decide which beneficiaries, and which assets from the trust, will be involved.

Elder Care Planning Trusts

These trusts are used to protect assets from expensive long term care costs.

Special Needs Trust.

The Special Needs Trust benefits individuals with special needs and is intended to hold assets given or bequeathed to such an individual from a third party, such as parents or other family members, and provides for the person’s care and comfort after using up government benefits. This trust helps to preserve financial security for individuals with special needs by allowing an individual to benefit from supplemental resources while keeping eligibility for public aid like SSI and Medicaid.

Medicaid Trust (Income Only Trust).

This trust helps seniors avoid tax issues and probate problems when a spouse living in a nursing home dies. This trust protects assets when an individual has too many resources to be eligible for Medicaid.

Qualified Income Trust (Miller Trust or QIT).

The Qualified Income Trust protects assets when an individual applying for Medicaid has income in excess of the amount needed for Medicaid eligibility. The QIT is an irrevocable trust that creates eligibility for long term nursing home care through Medicaid.

VA Eligibility Trust.

The VA Eligibility Trust protects assets outside the assets limits for long term assisted living, in-home, or nursing care and ensures eligibility for that care if needed.

Estate Tax Planning Trusts

The following trusts are used typically to avoid or reduce income and estate taxes.

Intentionally Defective Grantor Trust.

A trust created to freeze some of an individual’s assets for estate tax purposes, the intentionally defective trust is established as a grantor trust with a flaw intentionally built in to ensure that the individual must continue to pay income taxes, which reduces the value of the grantor’s estate and allows beneficiaries such as children or grandchildren to receive the full value of the assets.

Credit Shelter Trust.

The Credit Shelter Trust allows a married person to avoid estate taxes by allowing the assets specified in the trust agreement to be transferred to the beneficiaries, usually the investor’s children. This trust allows each spouse to maximize their personal estate tax exemption.

Marital Trust.

A Marital Trust creates a trust to benefit a surviving spouse and the heirs of the couple. Assets are moved into the trust when the first spouse dies, and the income generated by the assets are transferred to the surviving spouse. When that individual dies, the remaining assets go to the couple’s heirs.

QTIP Trust.

A Qualified Terminable Interest Property Trust provides for a surviving spouse, but this trust also allows the grantor to retain control of the distribution of the trust’s assets after the death of the surviving spouse. Useful for second marriage families and for families wanting to protect assets from predatory marriages.

Qualified Personal Residence Trust.

This trust transfers the grantor’s residence out of the estate, removing it from the value of the grantor’s estate as a gift. Under the terms of the trust, the grantor can continue to live in the residence for a number of years rent free, before the beneficiaries of the trust are vested in their interests.

Generation Skipping Trust.

This trust places assets in a trust designed to transfer them to a grantor’s grandchildren, rather than children, in order to avoid estate taxes that occur if the deceased’s children directly inherit the assets.

This trust allows an individual to make large financial gifts to family members while avoiding the gift tax. The trust is set up as an annuity, allowing the donor to make a donation and receive an annual payment from the annuity for a fixed term. At the end of the term, remaining assets in the trust go to the beneficiary as a gift.

Charitable Remainder Annuity Trust (CRAT).

This trust allows a donor to place a large gift of assets such as cash or property into a trust that pays back a fixed amount each year. Upon the donor’s death, the remaining assets are transferred to the designated charity.

Charitable Lead Annuity Trust (CLAT).

This irrevocable trust provides an income interest to a charitable organization, while passing assets to other beneficiaries. Part of this interest goes to another beneficiary, such as the donor, their family members or other individuals.

Charitable Remainder Unitrust (CRUT).

This irrevocable trust was created under the authority of the Internal Revenue Service and distributes a fixed percentage of its assets to a beneficiary, and, at the end of a fixed term, the remainder of the assets are transferred to a designated charitable organization.

Charitable Lead Unitrust (CLUT).

This trust allows a donor to give a variable amount annually from the trust to charity for a fixed term of the life of an individual. When the term of the trust is over, remaining assets are distributed back to the donor or other designated recipient.

Irrevocable Life Insurance Trust (ILIT).

This trust helps to preserve proceeds from life insurance from taxation, and allows the Trust to invest a deceased person’s life insurance benefit and administer the trust for a surviving spouse and children.

Grantor Retained Annuity Trust (GRAT).

This type of trust is an estate planning technique that minimizes the tax liability existing when intergenerational transfers of estate assets occur. Under these plans, an irrevocable trust is created for a certain term or period of time.

Grantor Retained Unitrust (GRUT).

This type of irrevocable trust allows the grantor to put assets into the trust and receive a variable amount of income from an annuity during the term of the trust, which can be fixed or for the life of the grantor.

Grantor Retained Income Trust (GRIT).

This type of trust allows the grantor to place assets in the trust for a beneficiary, but still retain the right to receive income from these assets for a certain period of time, after which the beneficiary starts to receive income.

Asset Protection Trusts and Other Miscellaneous Types of Trusts

Domestic Asset Protection Trust.

The DAPT is created in states that have anti-creditor trust acts (Alaska, Delaware, South Dakota, Nevada and some others), and allows an individual to establish a trust for his or her own assets that offers protection from creditors.

IRA Trust.

An IRA Trust is a special type of revocable living trust designed for the sole purpose of holding your IRA accounts for the benefit of your loved ones after your death. ... Or you can have the required minimum distributions paid out to the beneficiary at the time the trust receives each distribution.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Stratos-Wealth-Partners-Investment-Services-Zanesville-Newark-Ohio

We Are Committed

To providing our clients with a distinctly different experience providing guidance you can rely on.