Two Types of Trusts You May Not Know About Yet

millman law group types of trusts

Discover two types of trusts you may use to enhance your estate planning.

If you are familiar with estate planning, you know that trusts can be one of many crucial tools you use to prepare for the transfer of your estate. If you are not yet familiar with trusts, they are legal documents that set up terms of an agreement in which the property owner (the grantor) transfers legal ownership to a third party (the trustee) to manage and control the property for the beneficiaries. The trusts you create with your attorney at The Millman Law Group can be adjusted to meet the specific needs of a grantor or their heirs. A few common types of trusts include revocable living trusts, special needs trusts, and spendthrift trusts. However, there may be a couple of beneficial trusts you haven’t heard of yet. Keep reading to learn more about the generation-skipping trust and credit shelter trust. 

The Generation Skipping Trust

The generation-skipping tax (GST) rate is imposed on property transfers made from one generation to another, two or more generations removed. For example, if you leave some of your assets to your grandchildren rather than your children. The GST is one of the highest tax rates and is separate from estate tax rates. 

The current GST tax rate is at a flat rate of 40% on transfers over the lifetime GST tax exemption amount. As of 2023, each individual is allowed a $12.92 million lifetime exemption. 

At the time of your death, if you skip over a generation to leave some or all of your estate to future generations, your estate will have to pay the costly GST tax. 

In a properly established generation-skipping trust, the trust assets can “skip” the generation directly after the grantor without paying the GST tax. However, any generation-skipping trust distributions above the exemption threshold would still be subject to the 40% tax. 

The GST tax is very complicated, as are generation-skipping trusts. Working with an experienced estate planning attorney is essential when establishing these types of trusts. 

Credit Shelter Trust

Many types of trusts can benefit married couples, and a credit shelter trust is one of them. This trust allows each spouse to have a separate taxable estate. It is created after the first spouse’s passing, and the terms are set up to provide the surviving spouse with a life estate instead of direct inheritance. The couple’s children become the trust beneficiaries upon the surviving spouse’s death. 

Although no state estate tax exists in Florida, a credit shelter trust is a beneficial tool for protecting assets from federal estate taxes. Additionally, a credit shelter trust provides flexibility in distribution while protecting the surviving spouse’s assets. 

If you want to explore how these trusts may help you efficiently plan for your estate and beneficiaries, contact the knowledgeable attorneys at The Millman Law Group today.

Estate Planning Made Easy With Millman Law Group

Millman Law Group, PLLC is rare because it’s one of the only law firms that offer life planning in South Florida. From life care planning to the preparation of detailed estate plans, Millman Law Group has committed to serving Floridian elderly communities in Boca Raton, Palm Beach County, Ocean Ridge, Hillsboro Beach, and many other areas since 2018. Our dedicated team also specializes in special needs Trusts and catering to any age demographic because we know for certain it’s never too early to start preparing you and your family for your future. For the latest news in estate planning and elder care law, follow us on Facebook, Twitter, Linked In, and Pinterest. You can also contact us at 561-463-6480.