When you decide to create a trust to provide for your family after your death, you may be surprised to learn that there is more than one kind of trust. It is important to understand the differences among these trusts so you can set up the kind that will be best for your family.
If you intend to leave your children something large like your home, you may want to consider a qualified personal residence trust. CNN says that when you set up this kind of trust, you usually are still able to control this property until the time you have established to turn it over to your children. One important thing to understand about a QPRT is that you typically need to outlive the time period laid out in the trust, otherwise your estate will include the property's full market value.
Another type of trust you may want to consider is a credit-shelter trust. This allows the beneficiaries to receive the trust without paying taxes on it. This is because you can ensure the amount in the trust does not exceed the estate-tax exemption. One benefit of this kind of trust is that after you have set it up, you do not need to pay estate taxes on it, regardless of how much the estate grows.
You may also choose to set up a qualified terminable interest property trust. The only people who receive assets from this kind of trust are the ones you name. This can be beneficial if you have stepchildren or if you have divorced and want to ensure that your children and current spouse are provided for.
This information is general in nature and should not be used in place of legal advice.