There are several trusts commonly used to minimize taxes for surviving spouses:
Credit Trust: Spouses frequently leave all or most of their property to their surviving spouse when they die. The credit trust, a type of bypass trust, maximizes the use of the federal estate tax applicable exclusion amount for both spouses by placing assets in a trust. This preserves the decedent’s estate tax exclusion for the surviving spouse, so that when he or she dies, the estate enjoys their combined exclusion amount.
Disclaimer Trust: The disclaimer trust is another type of bypass trust. Spouses prepare a Will that leaves all assets to the other spouse with the condition that any portion of the estate that the surviving spouse disclaims (says she doesn’t want) goes into the trust. The disclaimer must be in writing and made within nine months of the assets’ distribution. Compared to a credit trust, this estate planning mechanism gives the surviving spouse more control over assets.
QTIP Trust (Qualified Terminal Interest Property): A QTIP trust can be used to obtain the tax benefit of transferring property to a surviving spouse while retaining the right to determine the ultimate distribution of the property. This allows a decedent to obtain the marital deduction and still retain control.
Because there are several kinds of Living Trust that help you avoid, reduce or postpone federal estate and income taxes, if you are interested in creating a Living Trust, contact an attorney.