Basic Trust Plan

For families with less than $2.5 million in combined total assets, the Basic Trust Plan is the crown jewel of estate planning. The primary goal of Revocable Living Trusts is to spare your family the length and headache-inducing probate process. In other words, Revocable Living Trusts save your family time and money.

A Revocable Living Trust, as the name implies, is fully revocable at any time while you are living and competent to do so. This means that you have the power to amend or rescind your trust at any time. And if you are married, both you and your spouse can amend or rescind the trust, even if one of you is unable to manage your finances.

In some respects, a Revocable Living Trust is like a big will. The difference is that the trust takes effect immediately upon the transfer of assets into it, whereas a will does not have any legal significance until after you die. Unlike a will, a Revocable Living Trust can and should include provisions protecting you and your family in the event of your incapacity.

Revocable Living Trusts also offer certain privacy protections that wills do not. When a will goes through probate, your estate becomes public record. In contrast, a Revocable Living Trust allows for a private (not public) settlement process.

The biggest advantage of Revocable Living Trusts are their flexibility. Not only can they be amended or revoked, but they can also plan for certain life planning goals. For instance, if you are a young and growing family, the trust can establish separate trusts for your children under a certain age (i.e., 25 or 30). Instead of your kids accessing your money at 18 (when they are considered legal adults), the trust can protect your assets for them until they turn whatever age you specifically designate. Your Revocable Living Trust can also create separate trusts for loved ones with special needs or children with trouble managing their finances.

QTIP Trust Plan

QTIP stands for "Qualified Terminable Interest Property" and is a special carveout in the rule for qualifying for the unlimited marital deduction under the estate tax code. QTIP Trusts can be created jointly or individually. So what does this mean?

When the first Settlor dies and is survived by his/her spouse, the terms of the QTIP Trust split the joint trust into separate trusts. One of the trusts is known as the marital trust and the other is the family trust. The marital trust is for the benefit of the surviving spouse and the family trust is for the benefit of the settlor's beneficiaries (including the surviving spouse).

The purpose of the QTIP Trust is to extend the payment of estate taxes until the death of the surviving spouse. The QTIP Trust also allows spouses to double their individual federal estate tax exclusion amount (instead of $12 million, estate taxes will not be owed on joint estates of married couples unless there is over $24 million in assets).