Connecticut residents who are planning their estate may want to consider the different trust types available. Some types are irrevocable. Understanding some of the various available options is a starting place.
Two Categories of trusts
All trusts are either revocable, giving you the power to change your mind as long as you are competent, or irrevocable, removing the opportunity to alter its provisions.
Marital trusts
A marital trust gives your assets to your spouse without them having to pay taxes in some cases. When the surviving spouse dies, whoever gets their assets must pay taxes on the things passed from one spouse to the other.
Bypass trusts
This irrevocable trust passes assets from one spouse to another at the time of death. This trust establishes a trustee to manage the assets.
Charitable lead trusts
These irrevocable trusts support one or more charities for a set time before any remaining assets transfer to a designated individual.
Charitable remainder trusts
These irrevocable trusts distribute assets to one or more non-charity beneficiaries for a set time before giving any remaining assets to a family member.
Generation-skipping trusts
These irrevocable trusts allow an individual to pass on assets to their grandchildren. Depending on the trust’s structure, your children may be able to reap monetary benefits from the assets.
Life insurance trusts
These trusts hold your life insurance policy as their only asset. When you die, they may prevent your heirs from having to pay as much in estate taxes, but they can count against your gift tax limit.
There are many types of trusts to consider. They can be an important part of your estate plan.