Can I Create a Trust Inside My Will?

All trusts aren't alike. When you put a trust in your will, it should be drafted precisely in order to satisfy your wishes and goals. Just any old boilerplate text or preprinted legal form won't do.

You may have one or more reasons to put a trust in your will (called a testamentary trust by lawyers). It can benefit your family, protect your money and save taxes. When the initial beneficiary dies (your spouse, perhaps), your trust can make certain other heirs chosen by you (say, children or grandchildren) will share the principal. Or you may want your favorite charitable organization to benefit. Quite likely you have other goals you want your trust to achieve.

You can set up a trust for just about any purpose. It's a remarkably versatile and flexible means to carry out your intent and assure the prudent management and eventual distribution of your assets. Let's look at some possibilities and benefits.

Types of Trusts
Testamentary trusts are often given various kinds of descriptive labels to identify their nature and purpose. Still, a trust can have multiple objectives.

• Marital trust. You can leave some of your estate to a marital trust for your surviving spouse's benefit. The trust assets will be free of federal estate tax in your estate because of a marital deduction, but they will be subject to estate tax when your spouse dies later. You can give your spouse the right to appoint the trust remainder to anyone. Or, if you prefer, you can use a "QTIP trust" so you can name the remainder beneficiaries.
  
  
• Family trust. Also called a bypass or credit-shelter trust, this provides lifetime financial support for your spouse. The trust assets can bypass the federal estate tax twice: first, at your death, when it qualifies for the unified estate and gift tax credit; second, on your spouse's death, when the remaining principal passes directly to your children or other beneficiaries you name. Many couples include both a marital trust and a family trust in their estate plans.
  
  
• Other trust types. An irrevocable life insurance trust is funded by the proceeds of life insurance on your life. A trust that benefits your family first and then distributes the principal to your favorite philanthropy is called a charitable remainder trust. Trust types go on and on.

Typical and Special Trust Provisions
Trusts usually last a long time. Just as you wisely choose the right kind of trust, you should include essential terms to assure flexibility and anticipate unpredictable circumstances.

Plan Carefully
Don't take chances—make sure your trust plans fulfill your beneficiaries' needs, allow prudent investment management and shelter the assets from unnecessary taxes. See an attorney who specializes in drafting wills and trusts. Equally important, name an experienced corporate trustee.

SOURCE: University of Georgia in an article written by Mary L. McCormack

Spice Up Your Estate Plan By Using Trusts

Are you looking for new ways to protect your family and your money? Would you like to cut estate taxes and probate costs, too?

Trusts can be the answer. They are remarkably versatile and can broaden your estate plan. While not magical, they can produce results that seem beyond belief.

The particulars are simple. A trustee chosen by you manages the trust assets, called the principal, and pays an income to those you want to support, your beneficiaries. Your will or a separate legal document is needed to establish a trust. When you create a trust, you are referred to as the grantor or donor.

Why Would You Use Trusts Today?
A trust can be either revocable or irrevocable. A revocable living trust agreement allows you to amend or cancel the trust at any time, in case you change your mind. On the other hand, if you put a trust arrangement in your will, it will become irrevocable upon your death.

You can set up a trust for anyone for just about any purpose. Here are some typical trust arrangements.

• Family trust. You can create a trust in your will—known as a testamentary trust—for the benefit of your spouse, children and other family members. In a typical family trust, a husband and wife set up a trust in their wills for the surviving spouse's benefit. Each directs that after his or her death, the trust shall continue for the support of their children until the children attain a certain age, say 25 or 30. Then the trustee is to turn over the principal to the children.
  
  
• "QTIP trust." The acronym stands for qualified terminable interest property. Although the surviving spouse receives lifetime income from this trust, he or she may not have the power (other than certain limited rights) to determine the beneficiary of the remaining trust assets upon the survivor's death.
  
  The intent is generally to allow more control in a second marriage situation where the goals are to provide maximum financial support for the surviving spouse, but still ultimately pass the trust principal to children of the prior marriage.
  
  
• Living trust. You might decide to create a trust for your own benefit, a trust that will remain operative while you are living. It logically is called a living, or inter vivos (Latin for "between living persons"), trust. In this case, you direct the trustee (which can be yourself or a professional trustee of your choice) to look after the trust assets, pay you the income and counsel you about the investments. You are to be kept fully informed about all transactions. You can reserve the right to amend or revoke the trust, to add or withdraw assets, and to approve investment changes. The trust can continue after your lifetime for the benefit of your family or others, and the trust assets avoid the costs and delays of probate.

A Versatile Tool
If you'd like to make a gift to our organization or another charitable organization, but you first must satisfy your own family's financial needs during your lifetime and after, a trust can be the ideal solution.

Trusts let you have it both ways—pass assets to your heirs with the least amount of tax and make a gift to us. Often trust arrangements will accomplish much more, including professional investment management and the assurance that your wishes will be fulfilled.

SOURCE: University of Georgia in an article written by Mary L. McCormack