Estate Planning Questions: Should You Set Up Multiple Living Trusts?

2. Do you own a home?

If you own a home and would like your beneficiary to use and enjoy your home for their lifetime and then have the property pass to someone else upon their death, you might consider a personal residence trust.

A personal residence trust provides a legal way for the person you are currently sharing your home with to remain there even if their name is not on the deed but also allow you to pass the property to someone else when that person dies.

This type of trust may be useful in the case of a second marriage in which only one spouse owns the marital home. In this situation, the trust could permit the surviving spouse to remain in the home during the rest of their lifetime, but then the homeowner's children could receive the property upon the spouse's death.

3. Do you have federal and state estate tax or other tax concerns?

While most estates fall under the threshold amount for estate taxes, if they are a concern, you may be able to better plan for them through the use of various trust instruments. Several types of marital trusts, including A-B trusts, can help manage estate tax obligations by shifting or delaying tax burdens until the death of the second spouse.

Wealthy estates may also be interested in generation-skipping trusts. These specially designed trusts avoid taxation in the generation between the decedent and their grandchildren. A generation-skipping transfer tax, however, may apply, so it is imperative to receive sound advice regarding these types of trusts.

The above are just some considerations when deciding on the kind of trust or trusts that would work for your estate. Because estate planning decisions can have far-reaching effects for both you and your loved ones, you should consult with an experienced estate planner who can assist you in choosing the right framework for you.