Most people in Kansas City associate estate planning with death. However, with trusts, an individual can control his or her assets during his or her lifetime in a way that is impossible with only a will. This blog has touched on certain types of trusts in the past. Today we are going to examine three type of trusts: generation-skipping trusts, qualified terminable interest property trusts and individual retirement account trusts.
Let’s start with generation-skipping trusts (GST). In these type of trusts, the assets go not to the creator’s children but to his or her grandchildren. That doesn’t mean the creator’s children get nothing. It may be possible to set up the trust in a way that allows the children to receive assets from the trust during the creator’s lifetime, and then the grandchildren will inherit the balance of the trust. A generation-skipping trust could also be written such that that a grandchild still receives an inheritance even if his or her parents divorce and remarry.
Now let’s move on to qualified terminable interest property trusts (QTIP). In a QTIP trust, an individual can pass earnings from assets to another individual, such as a surviving spouse, while the actual assets remain in the trust for the creator’s children. Again, this can help ensure the creator’s children inherit, even if the surviving spouse later remarries.
Finally, let’s look at individual retirement account trusts (IRA). Usually, with an IRA, the individual designates a beneficiary who will receive the IRA funds once the account holder dies. However, if the beneficiary is a minor, one may want to put the IRA funds into a trust that will dictate that the minor will receive the funds in installments once he or she is an adult. That being said, an IRA trust can also be set up in a way that allows a surviving spouse to keep the income the assets earn, while the assets themselves go to the beneficiaries of the trust.
These are only three types of the myriad of trusts available to individuals in Kansas City. To determine if a trust is right for you, you may want to consider contacting an attorney who can explain your options and help you make a decision that meets not only your needs, but the needs of your heirs.
Source: Forbes, “Do You Need A Trust For Your Estate Plan?,” Gary Plessl and Kevin Houser, May 14, 2015