A variety of trusts can protect an estate
None of us can predict the future, so if you want to make sure your family and other heirs receive what you want them to have, its never too soon to do your estate planning. Trusts can be a key part of those plans. But under what circumstances might you need to establish a trust?Before you choose a specific trust, youll need to know how trusts work. Usually, a trust is a legal arrangement in which you, as grantor, set up the rules and appoint a trustee who manages the trust and its assets. You (and possibly others) then fund the trust. The trustee invests the money according to the rules of the trust, which will also determine the recipient of the trusts proceeds.Beyond these common traits, trusts can be very different in their intended purpose. Your individual situation will dictate the type of trust, or trusts, you choose. Here are a few of the most common scenarios:If you want to give something to charity, you may want to consider a charitable remainder trust. In this trust, you donate an appreciated asset, such as shares of stock or a piece of real estate, to the trust. The trustee may then sell the asset and use the proceeds to purchase a portfolio of securities. From these investments, you can receive an income stream for life; upon your death, the charitable organization receives the remainder of the principal. By setting up such a trust, you defer capital gains taxes, and you can claim a limited deduction on your income taxes.If you want to reduce estate taxes, explore an irrevocable life-insurance trust. If you own an insurance policy, the proceeds are a part of your taxable estate. To help reduce the possibility of your heirs having to pay estate taxes, you may want to establish an irrevocable life-insurance trust. As long as the trust owns the insurance policies, the proceeds wont be included in your estate. You might also be able to use an irrevocable life-insurance trust to provide your family with assets they might not otherwise have received, especially if youve given away a sizable amount to a charitable organization through a charitable remainder trust.If you have remarried, you may want to think about a qualified terminable interest property trust if youre married for a second time but want to make sure your children from your first marriage are protected. This kind of trust enables you, as grantor, to provide for your surviving spouse and also maintain control of how the trusts assets are distributed once he or she also dies.If you want to protect children or grandchildren from spending their inheritance too quickly, you might want to explore a discretionary trust, which gives an independent trustee full authority to make decisions on how the trust funds may be spent for the benefit of the beneficiary.Trusts are complex instruments, so you will need to work with an attorney, a CPA and your financial adviser to make sure your plans can help you achieve the goals you want. A well-structured trust can achieve results that can benefit everyone.Charlie Wick,Tina DeWitt, Jessie Steinmetz, and Todd DeJong are financial advisers with Edward Jones. They can be reached in Eagle at 328-4959, in Edwards at 926-1728, in Gypsum at 524-1510 and in Avon at 845-1025.
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