In estate planning, trusts serve as crucial instruments to protect assets and streamline the distribution of wealth to beneficiaries. With the help of professional advisors, you can ensure that your real estate planning process includes one or more trusts.

Trusts are powerful legal tools that can provide numerous benefits for individuals and families. They allow individuals to protect and manage their assets, provide for their loved ones, and minimize estate taxes. Let’s explore some of the different types of trusts and their benefits.


Living Trusts

A living trust is a flexible trust that allows the creator—also known as the grantor—to maintain control over their assets during their lifetime. The grantor has the power to change or even revoke the trust before their death. One significant benefit of a living trust is that it allows for a private client-controlled transfer of assets to beneficiaries as it, when properly funded, eliminates the probate process after death. You opt out of the court system and create your own!


Irrevocable Life Insurance Trusts

Irrevocable life insurance trusts (ILIT), as their name states, cannot be altered or revoked once established and a life insurance policy is placed. ILIT is often used for long-term planning or to protect assets from estate taxes, as it provides several legal and financial advantages. For instance, the life insurance death benefit can be removed from the grantor’s taxable estate, reducing the overall estate tax burden by placing this life insurance policy within the trust.


Since 2023, the federal government has allowed individuals to transfer up to US$12.92 million to heirs without triggering a federal estate tax bill. However, Maryland’s estate tax will apply to transfers over $5 million.


Special Needs Trusts

Special needs trusts are designed to provide financial support for individuals with disabilities without jeopardizing their eligibility for government benefits. A special needs trust can be created for the benefit of a person with special needs by a parent, grandparent, or legal guardian. This trust ensures that the individual’s government benefits remain intact while also providing additional funds for their care and support.


Charitable Trusts

Charitable trusts allow individuals to support their favorite charitable causes while enjoying specific tax benefits. There are two basic types of charitable trusts: remainder trusts (CRTs) and lead trusts (CLTs).

CRTs provide income to the donor or other beneficiaries for a specified period before the remaining assets are donated to a charitable organization. CLTs, on the other hand, provide income to a charitable organization for a specific period before being transferred back to the donor or other beneficiaries.


Strategic Gift Trusts

Strategic Gift Trusts are irrevocable trusts that are used for asset protection during the client’s life.  These trusts may be used to preserve assets when you may have to apply for Medicaid or VA benefits should you become in need of long-term care. You set up the rules for who is in charge of the trust and what they should do with the funds. This technique keeps your family in control of your funds during what could be an overwhelming financial crisis.

Whether you are interested in protecting your assets, providing for your loved ones, or minimizing death taxes, there is likely a trust option that best achieves your estate planning goals. Consulting with Edward S. Clay, P.A. Law Offices will guarantee a smooth transition between ownership of wealth in a timely and protected fashion, minimizing the potential for controversy. Contact us today, and our experienced team will work with you to help you decide the right type of estate plan for you and properly establish it according to state and federal laws.