Michigan residents working on their estate plan might be interested to learn about the various types of trusts that are available. To begin, a person can set up both living trusts and testamentary trusts. A living trust goes into effect during the benefactor's lifetime, and a testamentary trust does not go into effect until after the benefactor's death.
If an individual decides that they would like to create a living trust, they can choose whether to make the trust revocable or irrevocable. With a revocable trust, all of the assets will stay in the control of the benefactor. This means that the benefactor could modify the terms of the trust at any time or revoke the trust altogether. An irrevocable is out of the benefactor's control and no longer considered their property. Estate taxes will not apply to any assets that have appreciated while they are part of an irrevocable trust.
Because every person's wishes for their estate plan may be different, there are several different types of trusts that can be created for specific situations. Using these trusts in the correct way can allow a person to achieve their desired estate planning goals while helping to reduce tax obligations at the same time. A credit shelter trust, for instance, can be established as a way to avoid estate taxes.
Because there are so many different kinds of trusts, a person working on their estate plan might want to consult an estate planning attorney. After evaluating an individual's financial situation and estate planning goals, an attorney might be able to help them to set up a number of trusts that will lower the tax burden for their beneficiaries.
Source: CNN Money, "What kinds of trusts are there?", December 07, 2014