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Should you form a trust when you plan your estate?

On Behalf of | Mar 23, 2021 | Estate Planning |

Forming a trust in Maryland could be a good way to pass your assets along to your loved ones. However, not all trusts are alike. You’ll need to figure out which trust is best for your situation before you sign off on an agreement.

What are the different types of trusts?

During the estate planning process, you could include instructions for a testamentary trust in your will. This is a trust that doesn’t form until after your death. Like a regular trust, you could use this trust to distribute assets or give money to your favorite charities.

You could also set up a living trust that takes effect while you’re still alive. This trust allows you to leave money for your loved ones as well as take care of your end-of-life expenses. However, if the trust earns any income during your lifetime, you’ll have to report your earnings on your taxes. Creditors could also seize some of your assets while you’re still alive.

If your spouse isn’t a citizen of the United States, you could set up a qualified domestic trust. With this trust, your spouse gets some of the benefits that other spouses would receive. Your estate planning attorney might recommend this option if you want to care for your spouse after you die.

People with large estates often form an irrevocable life insurance trust. If your estate totals more than $11.7 million, your beneficiaries might have to pay estate taxes. When you place your life insurance policy in a trust, the state won’t count it with the rest of your estate.

Which option is best for you?

Some people need to set up multiple trusts to care for their assets. Others only need a single well-planned trust that passes their assets along. An attorney could help you plan for the future–both for yourself and your family members.