Keep in mind that some of these benefits only apply to non-grantor trusts, a distinction we’ll cover in more detail later. Provide care for a special needs beneficiary.Give specific assets to the beneficiaries you choose.Keep certain assets out of the probate process (which is time-consuming and expensive).Receive your life insurance policy proceeds.Manage your estate tax and gift tax liabilities.Trusts are most commonly used as part of estate planning. Maybe you are still debating whether to create one or just want confirmation that you are making the right decision. Why Do People Create Trusts?īefore getting into the differences between simple and complex trusts, you may want a better idea of why people create trusts in the first place. Every trust will fit into one of these two categories. Whether a trust is simple or complex is crucial for tax status.
There are various types of trusts, including: The trustee is responsible for distributing the assets of the trust. Then, a trustee (or more than one trustee) manages the trust. The grantor creates the trust, putting assets in it. As a refresher, a trust is a legal entity commonly used to manage assets or as part of estate planning. This means that after the grantor creates the trust, they don’t have rights to the trust nor any control over it. Complex Trustsīoth simple and complex trusts are types of non-grantor trusts. Look at the differences between simple and complex trusts in more detail, as well as tips for deciding which type of trust to create.
Simple trusts have larger tax exemptions. Anything that isn’t a simple trust is a complex trust. They must distribute any earned income from trust assets annually to their beneficiaries. Simple trusts are trusts that don’t distribute to charity and don’t distribute the principal. Learn about the differences between each to make an educated decision. If you are thinking of putting your assets into a trust, you probably wonder whether a simple or complex trust is right for you.
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