Last week we discussed two general types of trusts: revocable trusts and irrevocable trusts. Today we are going to take a look at two other specific types of trusts -- generation-skipping trusts and qualified terminable interest property trusts.
As the name may imply, when a person in Maryland creates a generation-skipping trust (GST), his or her property is placed in a trust that names his or her grandchildren, instead of his or her children, as beneficiaries. However, this does not mean that one's children will receive nothing. For example, a person could create a GST that allows one's children to receive the income from the GST; the person's grandchildren will then receive an inheritance comprised of what remains in the GST after the creator's death.
Another trust that shares some of the qualities of a generation-skipping trust is a qualified terminable interest property trust (QTIP.) QTIP trusts may be useful if a person is concerned that if his or her spouse outlives him or her, that spouse may not pass the person's property down to one's children or other desired heirs. This may be of particular concern if a surviving spouse remarries after the first spouse's death to a person who has adult children from a previous marriage. In a QTIP trust, a person can set aside a certain amount of money in trust for his or her children. That person's spouse would not have access to the QTIP trust funds, but would have access to any earnings that the QTIP trust makes. However, the GST may have tax advantages in certain situations that the QTIP trust does not.
These are only two types of specific trusts a person in Maryland may consider when estate planning. The world of trusts is complex, though, with many options available depending on one's situation. Since this post cannot be considered legal advice, it is important that a person in Maryland who is considering creating a trust seek the help he or she needs to draft a solid trust that accomplishes his or her goals.