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Determine Which Trust Is Right For You

There are many ways to ensure your assets are protected, both during and after your lifetime. One way is to utilize trusts. These can be a good avenue for reducing taxes and protecting assets from creditors. Because there are many different types of trusts, it can be difficult to know which are right for you. Below are brief descriptions of trusts you may consider.

Revocable Living Trust (RLT)

An RLT is created during the lifetime of the trustmaker(s) and can be amended or revoked at any time. A trust is not subject to probate like a stand-alone will would be, which is an advantage because probate takes time, costs money, and is a matter of public record.

Irrevocable Trust (IRT)

Unlike a Revocable Living Trust, an IRT cannot be amended or revoked by anyone after it has been created.

“A Trust” or Marital Share

Upon the death of the first trustmaker, an RLT can be split into two trust shares. The “A trust” is the share for the surviving spouse during the remainder of his or her lifetime.

B Trust or Non-Marital Share

The “B Trust,” also known as a Bypass Trust, is the share of the estate of the spouse who passes first. This trust is irrevocable and is therefore creditor and predator protected. The assets in this share grow estate tax-free and are passed down to the ultimate beneficiaries.

Charitable Remainder Trust (CRT)

A charitable remainder trust is a way for individuals to reduce the taxes they incur by distributing assets to beneficiaries and donating the remainder to charity.

Domestic Asset Protection Trust (DAPT)

An irrevocable, whereby assets are protected from creditors by laws in a special jurisdiction. The trustmaker can be the beneficiary of the trust, and the assets will still remain protected from creditors. These are often used in conjunction with business entities, like an LLC.

Grantor Retained Annuity Trust (GRAT)

A GRAT is an irrevocable trust whereby the trustmaker transfers specific assets into the trust to be held for the benefit of the trustmakers’ children or close family members. The trust receives annual annuity payments and the beneficiaries of a GRAT receive the trust assets virtually estate tax free.

Irrevocable Life Insurance Trust (ILIT)

An ILIT is an irrevocable trust set up to own life insurance policies and is the primary beneficiary of the policy. This can be helpful for tax efficiency under the annual estate tax exclusion rate, which is currently $11.7 million dollars. It will decrease to $5.49 million per person on December 31, 2025.

Qualified Personal Residence Trust (QPRT)

This type of trust is intended for residential real estate (whether it be a primary or secondary home). Individuals or families who are looking to reduce the amount of gift tax they incur when transferring assets to a beneficiary can use a QPRT.

Ensure Your Assets Are Protected

Trusts can be an effective way to minimize estate taxes and protect your assets for generations to come. Whether you already know which trust is right for you or you need guidance, Hatley Law Group APC can help you plan for your future accordingly. Book a Call or contact us online.

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Hatley Law Group, APC

12636 High Bluff Dr., Ste. 400
San Diego, CA 92130-2071

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