One of the reasons why it is important to discuss your estate planning goals with a licensed attorney is because as a layperson, you are not going to be aware of all of your options. Many of our clients are very surprised when they find out that there are solutions that perfectly satisfy their objectives. With this in mind, in this blog post, we are going to look some trusts that you may have never heard of before.
Pet Trusts
You are certainly not going to forget any of your loved ones that walk on two legs when you are devising your estate plan, but how about the family member that walks on four legs? Yes, pet planning is quite possible. While it is true that humans are usually going to outlive their dogs, pet planning can be quite beneficial for senior citizens that are experiencing loneliness.
Believe it or not, you can establish a pet trust for the benefit of your dog. To do this, you fund the trust, and you name a trustee to act as the administrator after you are gone. Ideally, it would be the person that will care for the dog, but it does not have to be that way. You could empower the trustee to identify a willing caregiver when you establish the trust declaration.
In this document, you can leave behind specific instructions with regard to the way that you want the dog to be treated if you do in fact predecease the animal. You can stipulate the type of food the dog should have, treats, an exercise schedule, and so on. After the passing of the pet, assets that remain in the trust would be passed along to a secondary beneficiary that you name in the trust declaration.
Incentive Trusts
If you would like to leave an inheritance to someone that could use some prodding in a certain direction, you could make this person the beneficiary of an incentive trust. To provide an example, let’s say that you want your grandchild to get a very strong higher education.
You could establish and fund an incentive trust, and you could stipulate that the trustee will pay tuition and provide a steady stream of income to provide a good standard of living as long as the beneficiary remains in college. This can be taken a step further to include graduate school.
Some people will add another incentive layer to foster a work ethic. After the student graduates, you could allow for a dollar for dollar match of the salary that is earned by the beneficiary. This is just an example, but you can create a trust that involves any type of incentive, as long as you are not requiring the beneficiary to do something that is not legal.
QTIP Trusts
Another type of trust that can be very useful under certain circumstances is the qualified terminable interest property (QTIP) trust. It may sound like something that would only be appropriate for people that have very rare and complicated situations. In fact, this legal device is used to address a scenario that is quite common.
Many people with children that get divorced ultimately remarry, and some individuals do this relatively late in their lives when they have significant resources. If you are getting married to someone that is younger than you, and you are in this position, you are faced with an estate planning challenge.
You want to provide for your new spouse appropriately if you pass away first, but you also want to protect the inheritances that you intend to leave to your children. Under these circumstances, you could establish a qualified terminable interest property trust.
To implement this strategy, you fund the trust, and you name a trustee to administer it after you are gone. Your spouse would be the first beneficiary, and your children would be the final beneficiaries. If you die first, the trustee would distribute the earnings from the trust to your surviving spouse for the rest of his or her life.
The survivor would have no ability to change the terms of a trust. When the first beneficiary dies, your children would assume ownership of assets that remain in the trust.
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