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When setting up a trust for a beneficiary, one should consider the available assets so as to ensure equal distribution to the heirs. You should also consider the amount of future tax so as to ensure you do not expose your heirs into much taxation. Also consider the cost of setting up the trust so that it does not leave you bankrupt.
There are two types of trust to consider for a family, they include
1. credit shelter trust-in this type of 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 tax-free. Advantageous because there's an added bonus, Once money
is placed in a bypass trust, it is forever free of estate tax, even if
it grows and disadvantageous because it does not exceed estate tax exemption.
2. generation skipping trust- this kind of 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. This is disadvantage because it is not your next of kin who are the beneficiaries but advantageous because it is tax free.
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