trustTrusts can be a useful tool for managing your estate, both while you are living and after your death. There are many different types of trusts that apply to specific situations. Before establishing any type of trust, you should consult with your financial advisor to determine what is most appropriate to meet your financial goals. Below are guidelines to some of the more common specialized trusts.

Credit shelter trusts РWith a credit-shelter trust (also called a bypass or family trust), you write a will bequeathing an amount to the trust up to but not exceeding the estate-tax exemption. Then you pass the rest of your estate to your spouse taxfree. And there’s an added bonus: Once money is placed in a bypass trust, it is forever free of estate tax, even if it grows.

Generation-skipping trusts – A generation-skipping trust (also called a dynasty trust) allows you to transfer a substantial amount of money tax-free to beneficiaries who are at least two generations your junior – typically your grandchildren.

Qualified personal residence trusts – A qualified personal residence trust can remove the value of your home or vacation dwelling from your estate and is particularly useful if your home is likely to appreciate in value.

Irrevocable life insurance trusts – An irrevocable life insurance trust can remove your life insurance from your taxable estate, help pay estate costs, and provide your heirs with cash for a variety of purposes. To remove the policy from your estate, you surrender ownership rights, which means you may no longer borrow against it or change beneficiaries. In return, the proceeds from the policy may be used to pay any estate costs after you die and provide your beneficiaries with tax-free income.

Qualified terminable interest property trusts – If you are part of a family in which there have been divorces, remarriages, and stepchildren, you may want to direct your assets to particular relatives through a qualified terminable interest property trust. Your surviving spouse will receive income from the trust, and the beneficiaries you specify (e.g., your children from a first marriage) will get the principal or remainder after your spouse dies.