Advanced Trusts: 4 Ways to Protect Your Estate - Adviser Investments

Advanced Trusts: 4 Ways to Protect Your Estate

March 21, 2022
Couple discusses their options for planning their estate with an adviser

Traditionally, when we talk about estate planning tools, we focus on revocable trusts—an incredibly important and versatile wealth management tool. But that’s not the end of the story. In some cases, an irrevocable trust may be more appropriate for your needs. Today, we look at four types that can come in handy.

  1. Irrevocable Life Insurance Trust (ILIT). An ILIT is a trust that owns and controls your life insurance policy or policies. Think of it as a “middleman” that pays the premiums and distributes the proceeds. The upside of ILITs is that they shelter your beneficiaries from state and federal estate taxes owed on the insurance payout after your passing.
  2. Grantor Retained Annuity Trust (GRAT). GRATs help large estates manage the generation-skipping transfer tax exemption—$12,060,000 in 2022. More specifically, GRATs allow the grantor (the person funding the trust) to direct certain assets into an irrevocable trust and freeze their value, removing the additional appreciation from the grantor’s estate and minimizing estate or gift tax liability when the assets are passed down to heirs.
  3. Qualified Terminable Interest Property (QTIP). QTIPs can provide a surviving spouse with a lifelong income stream and allow the grantor to specify how the trust’s assets will be distributed when the surviving spouse passes away. But keep in mind: The income from the irrevocable trust flows to the surviving spouse free of tax thanks to the marital deduction, but the beneficiaries of that trust will ultimately pay estate taxes on the inheritance.
  4. Charitable Remainder Trust (CRT). Charitable bequests can reduce your taxable estate, but what if you need the tax deduction now? Enter the CRT—an irrevocable trust that potentially reduces your taxable assets and generates a predefined income stream for the donor or other beneficiaries, with the remainder of the donated assets going to your favorite charity at a specified time in the future. When you transfer cash or other assets into a CRT, you receive an immediate income tax charitable deduction based on the present value amount in the trust that will ultimately go to the named charity.

These advanced trusts require some assistance to set up. If you have any questions about securing your legacy, please do not hesitate to contact us—after all, we are The Planner You Can Talk To.

About Adviser Investments

Adviser Investments is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994, and have nearly 4,000 clients across the country and over $7 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. Our minimum account size is $350,000. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


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