When done right, an estate plan can help make certain that a person's assets will be easily passed on to the correct people after death. Not planning properly may cause family conflict, higher tax burdens, and the excessive time and costs of probate. While a simple will is an important component of any estate plan, sophisticated plans should also include the use of one or more trusts.
Revocable Living Trusts are established during a person’s lifetime. As long as the person who created the trust (the settlor) is living and mentally competent, a revocable living trust can be changed or revoked by the settlor for at any time, for any reason. When the settlor dies, the trust becomes irrevocable.
While many married couples opt for a trust that allows the surviving spouse to maintain control of the trust and its assets, Qualified Terminable Interest Property (QTIP) Trusts are irrevocable upon the settlor’s death and limit a surviving spouse's ability to control distribution of the trust assets. Upon the death of the settlor, all income from the trust is paid to the surviving spouse during his or her lifetime, and limited distributions of principal are often allowed as well. The remaining trust assets are distributed to the beneficiaries upon the second spouse’s death. By limiting the surviving spouse's right to receive distributions, QTIP trusts ensure that other beneficiaries (such as children or other family members) inherit the bulk of the trust's assets once the surviving spouse passes away.
Since most assistance programs for people with special needs require certain income and asset restrictions, Special Needs Trusts can provide for beneficiaries with disabilities without jeopardizing their eligibility for government benefits.
Testamentary Trusts are created by a will and do not take effect until the grantor dies. Testamentary trusts are rarely used because they do not avoid probate.
Give us a call at (248) 477-6300 if you need help determining the best arrangement for you and your family.