Estate planning involves crucial decisions, particularly when it comes to protecting and managing assets for individuals with children. Trusts offer numerous benefits, including asset preservation, tax advantages and control over asset distribution.
Here are some of the best trust options to consider when planning your estate with the interests of your children in mind.
Utilize a revocable living trust
A revocable living trust provides versatility, allowing you to maintain control over your assets during your lifetime while ensuring a smooth transfer to your children upon your passing. You have the flexibility to modify or revoke the trust as needed. By appointing a trustee, you can manage and distribute trust assets according to your children’s specific needs and circumstances.
Establish a testamentary trust
A testamentary trust takes effect upon your death. It enables you to provide detailed instructions for managing and distributing your assets in a manner that benefits your children. By naming a trustee, you can ensure the trust’s oversight and the proper utilization of assets for purposes such as education, healthcare or maintaining their standard of living.
Consider an irrevocable life insurance trust
An ILIT specifically holds life insurance policies. By placing your policies within an ILIT, you can distribute the proceeds to your children without subjecting them to estate taxes. This trust offers the advantage of removing insurance proceeds from your taxable estate while providing financial stability for your children.
Create a special needs trust
For parents of children with special needs, this type of trust is a valuable tool to safeguard their financial well-being without compromising eligibility for government assistance programs. A special needs trust allows you to allocate funds for their care while complying with the eligibility criteria for programs such as Medicaid or Supplemental Security Income.
You will need to determine which trusts align with your goals and specific family circumstances so that the trustee can manage your estate and care for your children according to your wishes, providing peace of mind for you and future financial security for your loved ones.