Trusts may be Revocable or Irrevocable, but the incorporation of trusts in estate or gift planning provide excellent tax and probate savings.  Consider some of the following trusts frequently utilized in my estate planning practice-both Federal and New Jersey:

Credit Shelter Trust : If married, the credit shelter trust, also known as the Bypass trust, permits both spouse's utilization of each Tax Exemption; without proper tax planning one spouse's exemption is LOST, this is a $1,500,000 loss during 2004 and 2005. With the incorporation of this trust, upon the death of the first spouse, assets up to the applicable exemption amount are transferred to this trust with the surviving spouse receiving all income generated from the trust principal (corpus) for the duration of his or her life. Also, the surviving spouse receives a "5 by 5 power" this is the absolute right to withdraw the greater of $5000 or 5% of the trust corpus annually.  Additionally, trust principal/corpus distributions to the surviving spouse are permissible at the discretion of the trustee   Thereafter, upon the death of the second spouse, the remaining principal/corpus passes to the surviving children (usually) and because the surviving spouse did not "control" the trust (the trustee is a "non-spousal" party---hopefully wisely chosen to distribute from principal pursuant to "ascertainable standards" required by the IRS) and therefore these trust assets "bypass" estate taxation in the surviving spouse's estate!

The Qualified Terminable Property Trust (QTIP ): This trust provides the surviving spouse with a lifetime income source and also preserves principal/corpus for the "ultimate beneficiaries" frequently children of the marriage or a children or children of a previous marriage. Additionally, this trust may be drafted in such a manner that the trustee is permitted to make principal/corpus distributions to the surviving spouse. Frequently when this trust is incorporated in tax planning, the grantor is deemed to be creating a "ruling from the grave" tax plan that will require compliance with the first spouse tax planning in the finalization of the second spouse's estate .

The Qualified Domestic Trust (QDOT): The trust vehicle is utilized when the surviving is not a U.S. citizen.  The Internal Revenue Service does not permit a non-citizen to receive the marital deduction unless the estate corpus passes to the surviving spouse by the utilization of a QDOT. The loss of the marital deduction is  or can be of very serious consequence when representing the non-citizen; however, it is to be remembered that the QDOT may be created subsequent to the death of the first spouse, but withy very strict compliance issues according to the writer.

The Qualified Personal Residence Trust (QPRT ):  The personal residence trust permits the removal of probably your most substantial asset from your taxable estate-your primary or vacation residence. The transfer (officially this is referred to as a "gift", which mandates a gift tax return to "perfect" the transaction) results in the title of the property in question being transferred to the residence trust  for whatever duration you as trustee chose. The government hopes you chose a long term trust and therefore remain in full control as trustee through your death; because you did not outlive the trust entity, you are at death the trustee with full control of the asset at death, therefore, the government returns this asset to your estate and it is subjected to the appropriate estate tax exposure as if the residence trust was never created. The only procedure to fully remove the residence from any estate tax exposure is to choose a trust term that you will outlive; this permits the asset to be deeded from the trust entity to the trust beneficiaries. Since the asset is no longer yours, as trustee or individually, there is no estate tax exposure. The "gift" referred to above, represents the value of the residence (according to your age at the creation of the trust, the term of the trust and IRS tables) less the value assigned to the tem you have chosen to maintain the residence in the trust entity. This gift tax information is reported on IRS form 709 and most probably will not result in an "out of pocket" expense but will become a debit against your personal estate tax credit (the tax credit each individual has against taxation during 2004 and 2005 is $555,800)

The Crummey Trust: A transfer or gift to a trust must enjoy a "present interest" status or classification to comply with the normal estate planning objectives.  Therefore to create a "present interest" the estate plan must provide the beneficiaries with the right to withdraw the "gift" to the trust for at least a specific period of time-usually thirty days. When the beneficiaries have the right to withdraw, the beneficiaries have a "present interest". The result of the creation of a "present interest" in the beneficiaries is the ability created to gift to the trust such amounts as necessary. to accomplish the desired results without unnecessary taxation.