Irrevocable trusts

Setting up an irrevocable trust

Beneficiaries receive financial security and, in some cases, tax advantages from an irrevocable trust. Generally, no one can change an irrevocable trust after you establish it. However, some state laws do allow changes in limited circumstances.

Common types of irrevocable trusts

Marital deduction trust

A married couple sets up this trust to take advantage of the federal estate tax marital deduction. After the death of one spouse, income from the trust is distributed to the surviving spouse. In some cases, trust principal can also be distributed.

Qualified terminable interest property trust (QTIP)

A QTIP trust typically benefits both a surviving spouse and children from a prior marriage. It is a type of marital deduction trust and is often used in tandem with a credit shelter trust.

Credit shelter or family trust

A surviving spouse or other family members receive the credit shelter trust’s income, in addition to the principal as needed. The spouse may have access to whatever assets are required from the principal to cover costs for health, education, maintenance and support. Upon the death of the surviving spouse, remaining assets are distributed to children or other designated beneficiaries.

Special needs trust

A trustee legally manages a disabled person’s resources. The assets are owned by the trust—not the individual with special needs—which allows the individual to access public assistance benefits.

Domestic asset protection trust (DAPT)

You shelter your trust assets from most future creditor claims with this type of trust.

Dynasty trust

This trust offers opportunities for tax-efficient growth to benefit multiple succeeding generations.

Grantor retained annuity trust (GRAT)

This powerful, but complex trust offers the potential for tax-efficient transfers of rapidly appreciating assets to beneficiaries while keeping income interest in the asset.

Qualified personal residence trust (QPRT)

You can potentially reduce your estate tax liability by giving your home or vacation property to your beneficiaries while you still live in it.

Setting up a charitable trust

Charitable trusts provide support for specific charities by setting up one of the following types of irrevocable trusts.

Charitable lead trust

You direct an income stream to qualified charities for a specified length of time. After this time expires, the remaining assets are distributed to named individuals, usually family members.

Charitable remainder trust

You direct an income stream to a beneficiary such as yourself or your spouse. After the death of the last income beneficiary or a specified term of years, the remaining assets are distributed to qualified charities.

Center for Family Philanthropy from U.S. Bank

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  • Align your giving strategies with your values and goals to create meaningful experiences for your beneficiaries
  • Coordinate between your financial advisor, attorney, and other professionals to make charitable giving a component of your overall wealth plan
  • Create a lasting impact for your family and your community

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Trust situs

Choose a location—or situs—where the state laws are favorable to you in relation to your goals for the trust.

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Questions to ask your parents/trust administrator about the trust process – from the beneficiary’s point of view.

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