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Types of trusts

California residents have many options with regard to estate planning tools. One of these options, trusts, can be used to ensure that certain assets are protected and distributed to the intended beneficiaries according to the wishes of the trust's creator. There are multiple types of trusts one can choose from to make sure that the assets intended for their heirs are properly managed.

Individuals who have spouses that are not citizens of the United States may opt to use a qualified domestic trust. The Internal Revenue Service requires that the trustee is a United States Citizen so that the estate tax will be paid when the second spouse dies. The trust has to be created in a way that ensures that the federal estate tax marital deduction will be applicable when the citizen spouse dies. The marital deduction allows the assets that are inherited by a surviving spouse to not be assessed federal estate taxes. Using a qualified domestic trust is an ideal way of postponing estate taxes until the second spouse dies.

A charitable remainder trust can be used as a source of income for a non-charitable beneficiary for a preset term or lifetime, and afterwards, the remaining assets in the trust will be given to charity. One type of this irrevocable trust is the charitable remainder annuity trust, which distributes a set annuity amount annually. The other type is the charitable remainder unitrust, which annually issues a fixed percentage of the assets in the trust.

Individuals may consult with an attorney who practices trusts and trust administration law to determine what type of trusts to use. The attorney may consider the type of assets a client has and the client's intentions for those assets. The attorney may advise of the pros and cons of the various types of trusts.

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