People of Planning –
Trusts were used long before Wills! They are still so important today that every insurance advisor should be skilled in a few definitions.
Trust – A creator (or maker or grantor) puts legal title of his/her property in the name of a person (trustee) to hold and manage for the benefit of others (beneficiaries) in accordance with the terms and instructions of the trust document.
An inter-vivos trust is made by the creator during life and a testamentary trust is one established by the creator’s will after death.
Revocable trust – Established by the creator during life. It can be changed or revoked at any time. Property can be added or withdrawn anytime at will. It provides no tax advantages, nor protects the property from creditors of the creator. It can keep the property out of Probate Court at death.
Irrevocable trust – Removes property from the control of the creator. It also keeps it out of the creator’s taxable estate and protects it from the creator’s creditors.
ILIT (irrevocable life insurance trust) – An irrevocable trust set up primarily (or only) to hold a life insurance policy. But it can usually hold other assets.
Grantor or defective (IDGT) trust – An irrevocable trust where income taxes on the trust flow back to the creator, but the assets remain outside the creator’s taxable estate. Most irrevocable trusts are grantor/defective trusts.
SLAT (spousal lifetime access trust) – An irrevocable trust with a life interest in the creator’s spouse stacked on top of the remainder interest to the other beneficiaries (usually the kids). This allows the spouse generous access to the assets during her life, but anything left over is not includible in the spouse’s taxable estate.
Dynasty (generation-skipping) trust – All beneficiaries have only a lifetime interest in the trust. At death their interest is life to their heirs for life and on down the line. Because all generation’s interests end at death nothing is ever included in anyone’s taxable estate.
You are leaving this email a better person! Contact me at 706-354-0401 or tom@cpsadvancedmarkets.com with any questions.