Estate Planning FAQs

1. What is Estate Planning?
2. What Documents Are Part of an estate?
3. What Are Some Estate Planning Tools and Techniques? (part 1) (part 2)
4. What About A Revocable Trust?
5. I’ve Heard of an AB Trust, What Does That Do?
6. What are my Options if I Want an Irrevocable Trust?
7. What About Estate Taxes?
8. What About Other Fees and Costs?
9. My estate is Really Pretty Small Must I Still go Through Formal Probate?
10. What Does Estate Planning Cost?
Estate Planning Package

6. What are my Options if I Want an Irrevocable Trust?

There are many types of irrevocable trusts, and they are used for a variety of purposes. The following is a very brief description of some types of irrevocable trusts:

A. Permanent trusts. The so-called permanent trust is a trust designed for the prolonged management of permanently and irrevocably transferred assets. The trust objectives include immediate removal of the transferred property from a settlor's estate for estate tax. The trust terms are also designed to ensure that the income from trust corpus will no longer be includable in the settlor's taxable income for income tax purposes.

B. Life insurance trusts. An irrevocable life insurance trust is typically used to remove the proceeds of life insurance from the insured's gross estate, while making those proceeds available as a source of liquid funds for the payment of estate taxes and other obligations.

C. Trusts for minors. Trusts for minors are specialized forms of permanent trusts that more narrowly focus on the specialized circumstances and requirements of minors.

D. Grantor retained interest trusts. A grantor retained interest trust allows the settlor to retain an interest in trust assets for a limited period of time, with the remainder interest passing to another person.

E. Charitable remainder trusts. A charitable remainder trust is designed to provide benefits to named individuals for a specified period of time, with the remainder interest passing to charity.

F. Special needs trusts. The principal purpose of a special needs trust is to preserve government benefits for a disabled or aged beneficiary.

G. Estate balancing trusts. If one member of a married couple is wealthy and the other has few assets, an inter vivos qualified terminable interest property (QTIP) trust can be used to provide the less wealthy spouse with a taxable estate, thereby making it possible to take advantage of that spouse's unified credit upon his or her death.

H. Surviving spouse created qualified domestic trust (QDOT). Generally, no estate tax deduction is allowed for transfers to a surviving spouse who is not a citizen of the United States. A variation of the marital deduction can be obtained if the transferred property is put in a qualified domestic trust (QDOT). The QDOT secures an obligation to the federal government to pay additional estate taxes on the QDOT property when the spouse dies or the principal is distributed.