Trusts can be very effective tools for reducing estate taxes and avoiding the Florida probate process.
However, trusts come in countless shapes and sizes and many people do get confused about the types of trusts exist and how they differ from each other.
A few different kinds of trusts are:
- Living trust — This is established and goes into effect during your life. This trust can sometimes also be called an Inter-vivos Trust.
- Testamentary trust — This is included within your will, and it only goes into effect after you pass away.
- Revocable trust — You can change the terms of this trust at any time, remove assets from the trust or cancel the trust altogether.
- Irrevocable trust — You give up control of the assets, and the power to change the terms of this trust.
- Dynasty or generation-skipping trust — This is often used to transfer assets tax-free to grandchildren or great-grandchildren.
- Credit shelter or family trust — This allows you to place a certain amount of assets into the trust to reach the estate-tax exemption, then the rest of your assets pass to your spouse tax-free.
- Life insurance trust — These trusts are usually established to own a life insurance policy that pays estate tax that may arise after death, particularly if there is a concern your estate may not have enough cash on hand.
- Qualified terminable interest property trust — This allows you to give assets to certain relatives (such as biological children instead of stepchildren) while still providing your spouse with income.
Because the world of trusts is so complex, it makes sense to consult a professional before making any estate planning decisions. Consider scheduling a consultation with a Miami lawyer skilled in these intricate estate planning issues.
