With so many ways to approach estate planning, many people often have more questions than answers. What will the impact be on tax planning? What are the best documents to draft for protecting inheritance? What if I have children with special needs and I want to make sure they are taken care of? The list could go on and on. Fortunately, the simple answer to many of these question is this: trusts. However, there are many types of trusts for an individual or family to consider. One popular method, known as the "living trust," was recently the subject of a very informative article which tried to dispel certain myths about this particular estate planning device.
So what is a common use for a living trust? Well, one use is for married couples who may not want to necessarily leave everything to one another for tax reasons, but instead want to pass that tax burden on to their children, who may be in a better place to deal with the tax consequences of inheriting. First, this type of living trust is set up so that if one spouse dies the other spouse will enjoy the rights to the use and possession of certain assets, but ownership will actually pass on to the couple's children upon the subsequent death of the surviving spouse. This is also commonly known as a "marital trust." Of course, this is just one type of trust. There are many others.
So, which type of trust is the right type for our Michigan readers? The answer to that question, unfortunately, is not so straightforward. Each individual person or family has their own unique circumstances. Where an irrevocable trust may be right for one person a revocable trust is the right option for another. It all depends. Getting the right information on the options, however, makes the ultimate decision on what is right all that much easier.
Source: redding.com, "Lewis Chamberlain: Many myths surround living trusts," Lewis Chamberlain, May 11, 2013