Reference Library
Each of these structures earns its complexity in specific situations. Use this as preparation for a conversation with your estate planning attorney — not as a replacement for one.
Purpose
Irrevocable trust funded by one spouse for the other, removing assets from the taxable estate while preserving indirect access.
Good for
High-net-worth couples wanting to lock in the lifetime gift exemption without losing all household access to the assets.
Watch out
Reciprocal trust doctrine if both spouses create mirror SLATs. Loss of access on divorce or death of the beneficiary spouse.
Purpose
Owns life insurance policies outside the insured's taxable estate so the death benefit passes income- and estate-tax-free.
Good for
Estates near or above the federal/state exemption that need liquidity to pay estate tax or equalize inheritances.
Watch out
Three-year lookback if existing policies are transferred. Crummey notices must be sent annually for gift exclusion.
Purpose
Transfers a primary or vacation residence to heirs at a discounted gift value while the grantor retains the right to live there for a term.
Good for
Appreciating homes in estates with exposure to estate tax; works best in higher interest rate environments.
Watch out
If the grantor dies during the term, the house is pulled back into the estate. Rent must be paid to the trust after term ends.
Purpose
Freezes the value of appreciating assets by transferring future appreciation to heirs while paying the grantor a fixed annuity.
Good for
Concentrated positions expected to outperform the IRS §7520 rate (e.g., pre-IPO stock, recovering equities).
Watch out
If the grantor dies during the term, assets revert to the estate. Short rolling GRATs reduce mortality risk.
Purpose
Pays the grantor (or beneficiaries) an income stream for life or term, then distributes the remainder to charity — with an upfront charitable deduction.
Good for
Owners of highly appreciated assets seeking diversification without immediate capital gains, plus charitable intent.
Watch out
Irrevocable — charity is locked in. Income stream is taxable. Requires actuarial planning and ongoing administration.
Purpose
Mirror of the CRT: pays charity an income stream for a term, then returns the remainder to family — often at a reduced gift value.
Good for
Families with strong charitable intent and a desire to pass appreciation to the next generation tax-efficiently.
Watch out
Sensitive to interest rates and investment returns. Wrong structure can create unwanted taxable income to the grantor.
Purpose
Long-duration (often perpetual) irrevocable trust designed to skip generations and avoid repeated transfer taxes.
Good for
Families using GST exemption who want assets to benefit children, grandchildren, and beyond while remaining creditor-protected.
Watch out
Choice of situs matters — favor states like SD, NV, DE, AK that allow perpetual trusts and have no state income tax on trusts.
Purpose
Holds assets for a disabled beneficiary without disqualifying them from means-tested benefits like SSI or Medicaid.
Good for
Families with a beneficiary who has, or may develop, a qualifying disability. First-party (self-settled) vs. third-party variants exist.
Watch out
First-party SNTs require Medicaid payback at death. Distributions for food/shelter can reduce SSI benefits.
Purpose
Self-settled irrevocable trust in a permissive state (NV, SD, DE, AK, etc.) offering creditor protection for the grantor.
Good for
Professionals in high-liability fields (physicians, developers, business owners) seeking lawful asset protection.
Watch out
Fraudulent transfer rules apply. Out-of-state creditors may challenge in non-DAPT jurisdictions. Long seasoning periods recommended.
Purpose
Provides income to a surviving spouse for life, with remainder to chosen beneficiaries — typically children from a prior marriage.
Good for
Blended families ensuring the surviving spouse is cared for without diverting principal from first-marriage children.
Watch out
Marital deduction is preserved but assets are included in surviving spouse's estate. QTIP election must be made on Form 706.
Purpose
A trust that, in a given tax year, either accumulates income, distributes principal, or makes charitable contributions — the opposite of a simple trust.
Good for
Trusts that need flexibility to retain income for future needs, sprinkle distributions among beneficiaries, or fund charitable gifts from corpus.
Watch out
Trust pays tax on undistributed income at compressed brackets (top rate hits around $15K). Requires Form 1041 and Schedule K-1s for any distributions.
Purpose
Gives the trustee full discretion over whether, when, and how much to distribute to beneficiaries — no beneficiary has an enforceable right to a distribution.
Good for
Protecting beneficiaries from creditors, divorcing spouses, or their own poor judgment; tailoring support to changing needs over time.
Watch out
Places heavy responsibility on the trustee — clear distribution standards (e.g., HEMS) and a thoughtful letter of wishes help prevent disputes.
Purpose
Includes a spendthrift clause preventing beneficiaries from assigning their interest and shielding trust assets from most creditors until distributed.
Good for
Beneficiaries vulnerable to creditors, lawsuits, divorce, addiction, or impulsive spending — standard protective language in most modern trusts.
Watch out
Protection generally ends once funds are distributed. Exceptions exist for child support, alimony, certain tax claims, and self-settled trusts in most states.