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Examining the different types of trusts for estate planning

Gregory A. Lang

For Minnesota residents, trusts can be a very important part of their estate planning. Those who are looking into setting up an estate plan may be interested in more information about the types of trusts available and how they can benefit both the owner of the trust assets and their beneficiaries.

At the most basic level, there are two major types of trusts. Living trusts are set up while a person is still alive while a testamentary trust is created by a will after the person's death. Living trusts, in turn, can be either revocable or irrevocable. Revocable trusts give the person setting up the trust the power to make changes and control the trust assets while they are alive. Irrevocable trusts are the opposite; the trust assets are no longer the property of the person who set the trust up and they no longer have control over them.

While these are the basic and most common types of trusts, other classes of trusts exist as well. Qualified personal residence trusts and credit shelter trusts take assets out of a person's estate in order to save money on taxes. For those who have a mixed family, including stepchildren and divorces, a qualified terminable interest property trust allows property to be added to a trust that belongs to a spouse during their lifetime but goes to the benefit of others after their death.

Understanding the process of setting up trusts for estate planning purposes can be difficult without the help of an experienced attorney. The attorney may be able to assess the person's estate and draft the appropriate documents to minimize taxes and provide for the person's heirs in the future.

Source: CNN Money, "What kinds of trusts are there?", December 05, 2014

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