Types of Trusts We Administer

Revocable Trusts

A revocable trust, often referred to as a living trust, is a legal arrangement where an individual (the grantor) places assets into a trust during their lifetime, which can be managed by a trustee. Unlike an irrevocable trust, the grantor retains the ability to modify or revoke the trust during their lifetime, providing flexibility and control over their assets. Upon the grantor’s death or incapacitation, the trust assets are then transferred to the designated beneficiaries without the need for probate, offering privacy and efficiency in estate distribution. Revocable trusts are suitable for individuals seeking to manage their assets and distribute them seamlessly while maintaining control over their estate during their lifetime. They are particularly beneficial for those concerned about privacy, avoiding probate, and ensuring efficient asset management and distribution.

Marital and Credit Shelter Trusts

Marital and credit shelter trusts are estate planning tools designed to maximize the preservation and distribution of assets, particularly in the context of estate taxes. A marital trust, also known as a spousal trust, allows one spouse to transfer assets to the other spouse upon their death without incurring estate taxes. This arrangement ensures that the surviving spouse has access to the assets while potentially reducing or deferring estate taxes until the surviving spouse’s death. On the other hand, a credit shelter trust, also called a bypass trust or a family trust, allows individuals to maximize their estate tax exemptions by sheltering assets up to the exempted amount from estate taxes. This trust can benefit married couples, especially those with significant assets, by minimizing estate tax liabilities upon the death of both spouses. Marital and credit shelter trusts are suitable for individuals and couples seeking to protect their assets, minimize estate taxes, and ensure efficient distribution to beneficiaries according to their wishes.

Family Trusts

A family trust, also known as a discretionary trust, is a legal arrangement that holds assets on behalf of beneficiaries, managed by a trustee. Unlike other trusts with specific purposes like minimizing taxes or protecting assets, a family trust offers flexibility in distribution and management. The trustee has discretion over how and when to distribute assets to beneficiaries, allowing for tailored support based on individual needs and circumstances. Family trusts can hold various assets, including property, investments, and business interests. They are often used to protect family wealth, provide for future generations, and maintain privacy in financial matters. Family trusts are suitable for families looking to preserve assets, manage wealth across generations, and maintain control over their estate while providing for the financial needs of beneficiaries.

Irrevocable Grantor Trusts

Irrevocable grantor trusts are a type of trust in which the grantor relinquishes ownership and control of assets placed into the trust, typically for the benefit of beneficiaries. Once established, the terms of an irrevocable grantor trust generally cannot be changed, and the grantor cannot revoke the trust. By transferring assets into the trust, the grantor may remove them from their estate for estate tax purposes. The grantor may still retain certain powers over the trust, such as the ability to receive income generated by the trust assets. Irrevocable grantor trusts are often used for estate planning purposes to reduce estate taxes, protect assets from creditors, and provide for beneficiaries. They may be particularly suitable for individuals seeking to pass on wealth to future generations while minimizing tax liabilities and ensuring asset protection.

Generation Skipping & Dynasty Trusts

Generation skipping and dynasty trusts are powerful estate planning tools designed to transfer wealth across multiple generations while minimizing tax implications. A generation skipping trust allows assets to be passed directly to grandchildren or more remote descendants, bypassing the children of the grantor. This strategy can potentially avoid estate taxes that would otherwise be incurred if the assets were passed down through successive generations. Dynasty trusts, on the other hand, are long-term trusts established to provide for multiple generations of beneficiaries, often in perpetuity. These trusts are structured to preserve and grow wealth over time, with assets managed by trustees according to the terms set forth by the grantor. Generation skipping and dynasty trusts are ideal for affluent families aiming to create a lasting legacy, protect assets from taxation and creditors, and provide for the financial security of future generations.

Charitable Trusts

Charitable trusts are estate planning vehicles established to benefit charitable organizations or causes while providing potential tax benefits for the grantor. There are two main types: charitable remainder trusts and charitable lead trusts. In a charitable remainder trust, assets are transferred to the trust, and the named beneficiaries receive income from the trust for a specified period, after which the remaining assets go to the designated charity. Conversely, in a charitable lead trust, the charity receives income from the trust for a set period, after which the remaining assets are transferred to the grantor’s beneficiaries. Charitable trusts allow individuals to support causes they care about while potentially reducing income and estate taxes. They are particularly suitable for individuals with significant assets who wish to leave a philanthropic legacy, receive income tax deductions, and minimize estate tax liabilities.

Special Needs Trusts

Special needs trusts, also known as supplemental needs trusts, are established to provide financial support and care for individuals with disabilities or special needs. These trusts are designed to supplement government benefits such as Medicaid and Supplemental Security Income (SSI) without jeopardizing eligibility for these programs. Assets placed in the trust can be used to cover expenses not covered by public benefits, such as medical care, therapy, education, and recreation, enhancing the quality of life for the beneficiary. A trustee manages the trust and distributes funds according to the beneficiary’s needs, ensuring that they maintain access to essential services and support throughout their lifetime. Special needs trusts are suitable for families with individuals who have disabilities or special needs, ensuring that they receive proper care and support while safeguarding their eligibility for government assistance programs.

Tennessee Investment Services Trusts (TIST)

Tennessee Investment Services (TIS) trusts are specialized investment vehicles designed to offer residents of Tennessee a tax-efficient way to manage their investments. These trusts are managed by professional investment advisors and offer a range of investment options tailored to the needs and goals of investors. TIS trusts typically provide benefits such as tax-deferred growth and potential tax advantages, making them attractive options for individuals looking to maximize their investment returns while minimizing tax liabilities. These trusts may be suitable for Tennessee residents seeking to build wealth, save for retirement, or achieve other financial goals while taking advantage of the tax benefits available through these investment vehicles.

Irrevocable Life Insurance Trusts (ILIT)

Irrevocable Life Insurance Trusts (ILITs) are estate planning tools designed to hold life insurance policies outside of the insured individual’s estate, thereby potentially reducing estate taxes upon their death. The trust is irrevocable, meaning once it’s established, the grantor relinquishes control over the assets and terms of the trust. The ILIT is typically named as the beneficiary of the life insurance policy, and upon the insured’s death, the policy proceeds are paid into the trust. The trustee then manages these funds according to the trust’s terms, which may include providing for the financial needs of beneficiaries, such as surviving spouses or children. ILITs are beneficial for individuals with large estates who want to ensure their heirs receive financial support while minimizing estate taxes. They also offer privacy, as assets held in the trust avoid probate and remain outside of the public record.

Spousal Lifetime Access Trusts (SLAT)

Spousal Lifetime Access Trusts (SLATs) are estate planning tools that allow one spouse to transfer assets to a trust for the benefit of the other spouse, while still retaining indirect access to the trust assets during their lifetime. The grantor spouse establishes the trust and funds it with assets, often using their gift tax exemption to make tax-free transfers. The trust typically names the non-grantor spouse as the beneficiary, providing them with access to income and potentially principal distributions from the trust. Since the grantor spouse indirectly benefits from the trust through their relationship with the beneficiary spouse, they may indirectly access the trust assets if needed. SLATs offer potential tax advantages by leveraging the gift tax exemption and removing assets from the grantor’s estate. They are suitable for couples looking to provide financial security for each other.

Grantor-Retained Annuity Trusts (GRAT)

Grantor-Retained Annuity Trusts (GRATs) are estate planning tools designed to transfer assets to beneficiaries while minimizing gift and estate taxes. The grantor establishes the trust and transfers assets into it, retaining the right to receive annuity payments from the trust for a specified period. At the end of the trust term, any remaining assets pass to the designated beneficiaries, typically family members, free of gift tax. The value of the gift is determined by subtracting the present value of the retained annuity payments from the initial value of the assets transferred to the trust. GRATs can be particularly beneficial when interest rates are low or when the assets transferred to the trust are expected to appreciate significantly, as any growth in excess of the IRS’s assumed rate of return passes to the beneficiaries tax-free. They are suitable for individuals seeking to transfer wealth to heirs tax-efficiently while retaining some income from the transferred assets for a defined period.

Qualified Personal Residence Trusts (QPRT)

Qualified Personal Residence Trusts (QPRTs) are estate planning tools used to transfer ownership of a personal residence to beneficiaries while potentially minimizing gift and estate taxes. The grantor establishes the trust and transfers ownership of their primary or vacation home into it, retaining the right to live in the residence for a specified term. During this term, the grantor pays rent to the trust, which is typically set at fair market value. At the end of the trust term, ownership of the property passes to the designated beneficiaries, often family members, free of gift tax. If the grantor survives the trust term, the property is removed from their estate for estate tax purposes. QPRTs are particularly suitable for individuals with valuable residential properties who wish to transfer ownership to heirs tax-efficiently while retaining the right to live in the home for a defined period. They can also be used as a strategy to remove future appreciation of the property from the grantor’s taxable estate.

Tennessee Incomplete-Gift Non-Grantor Trusts (TING)

Tennessee Incomplete-Gift Non-Grantor Trusts (TINGs) are a sophisticated estate planning strategy utilized by high-net-worth individuals to transfer wealth to future generations while retaining some control over the assets. TINGs are irrevocable trusts established in Tennessee that allow the grantor to make incomplete gifts to the trust, meaning they retain certain powers or interests that prevent the transfer from being considered a completed gift for tax purposes. As a result, the assets in the trust are not included in the grantor’s estate for estate tax purposes, and any future appreciation of those assets can potentially be transferred to beneficiaries free of gift and estate taxes. However, the grantor typically forfeits access to the trust principal and income. TINGs are complex structures suitable for individuals seeking to maximize wealth transfer opportunities while minimizing tax liabilities and maintaining some level of control over trust assets. They are particularly beneficial for families with significant assets looking to establish a legacy and provide for future generations in a tax-efficient manner.

Tennessee Community Property Trusts

Tennessee Community Property Trusts (TCPTs) are specialized estate planning tools that enable married couples to convert their jointly owned property into community property, a legal concept recognized in some states, including Tennessee. In TCPTs, each spouse transfers their separate property into the trust, where it is treated as community property. This designation can offer significant tax benefits, as community property receives a step-up in basis upon the death of the first spouse, potentially reducing capital gains taxes for the surviving spouse or heirs. TCPTs also provide asset protection benefits, shielding the trust property from creditors and ensuring efficient estate administration. TCPTs are well-suited for married couples residing in Tennessee who wish to maximize tax advantages, protect their assets, and simplify estate planning by converting separate property into community property within the trust structure.

Marital Asset Protection Trusts (MAP)

Marital Asset Protection Trusts (MAPTs) are estate planning tools specifically designed to shield assets from creditors and provide financial security for married couples. These trusts are typically established as irrevocable trusts, allowing couples to transfer assets into the trust while still retaining certain beneficial interests, such as access to income or the right to reside in trust-owned property. By placing assets in a MAPT, couples can protect their wealth from potential lawsuits, business liabilities, or other creditor claims. MAPTs also offer the advantage of safeguarding assets in the event of divorce, ensuring that each spouse’s share of the marital estate is protected. MAPTs can be tailored to meet the unique needs of each couple and are suitable for individuals seeking to safeguard their assets and provide for their spouse’s financial security in the face of potential risks or uncertainties.