Advanced Trusts: 4 Ways to Protect Your Estate

RWA Wealth Partners

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.

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.
Grantor Retained Annuity 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.
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.
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.

This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice, or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.