There are many different types of trusts that can be used when you are planning your estate. This is one of the reasons why you should work with an attorney to develop your plan, because there is no reason why you would understand all the options.
With this in mind, we are going to look at five odd trusts that fly under the radar in this post.
Secret and Semi-Secret Trust
The first trust that we will look at is usually not recommended by estate planning attorneys because of the potential for messy legal actions. We will cover it anyway because it has been utilized, and it is somewhat intriguing.
We will explain the “secret trust” through the use of an example. Let’s say that Doug is a happily married man on the surface, and he has children with his wife. In reality, he lives a double life, because he has a clandestine long-term paramour, and he wants to leave her an inheritance.
He approaches his brother, Donald, to ask him for help. Doug will leave an inheritance to Donald in his will, and the family will not think anything of it. Little do they know that Donald will use the money to establish a trust for the mistress.
This is the full-fledged secret trust, and there is also a semi-secret trust. The fact that a trust is going to be established would be stated in the will, but the details would be kept secret.
The term “Totten trust” can sound a bit sophisticated, but in fact, it is quite simple. You can open an account at a bank or a brokerage and add a beneficiary. This is called a payable on death account or Totten trust.
If you establish this type of trust, the beneficiary will assume ownership of the assets after your death. The transfer would not be subject to probate, which is a public legal proceeding that would be necessary if a will was being used to transfer the assets.
Since the transfer would not go through probate, the public would have no way of knowing about the existence of the account or the identity of the beneficiary. Someone that would be interested in a secret trust would do well to consider this as an alternative.
A blind trust is another somewhat unusual device. Someone that is holding political office, or an executive that is subject to securities laws, may want to convey assets into this type of trust.
The trustee would manage the assets in the trust, and the grantor would not know how the trustee was investing the resources. Since the grantor would be kept in the dark, their professional actions would not raise any red flags.
The rabbi trust has an odd name, but it really has nothing to do with people of the cloth. This type of trust is sometimes used by companies to compensate executives that can benefit from deferred payments.
Assets can accumulate in the trust while an executive is making top dollar during their working career. They could start taking distributions after they retire when they are in a lower tax bracket.
There are funeral homes that offer funeral trusts. You contribute assets into the trust while you are living, and after your death, the resources are used to cover your final expenses.
It is important to do your research and make sure that you are dealing with a reputable entity if you decide that you would like to establish a funeral trust.
Attend a Free Webinar!
We are conducting a number of webinars over the coming weeks that will help you understand the steps that you can take to protect your legacy. There is no charge to attend the sessions, and they couldn’t be any more convenient, so this is great way to invest some spare time.
And if you join us, you will qualify for a free one-hour virtual consultation. You can see the dates if you visit our Cincinnati estate planning webinar page, and when you identify the session you would like to attend, follow the instructions to register.
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