Trusts are legal tools designed to help you protect assets, reduce taxes, and make sure your wishes are carried out. They aren’t just for the ultra-wealthy. Anyone with a home, retirement accounts, or loved ones to provide for can benefit from trust planning. The right trust depends on your goals—whether that’s flexibility, protection, tax planning, or supporting family members with specific needs.

Revocable trusts = flexibility. You stay in control and can make changes as life evolves.
Irrevocable trusts = protection. Giving up control may help shield assets from your taxable estate and potentially reduce estate taxes.
Specialized trusts fit unique needs. Examples include special needs, charitable, and generation-skipping trusts.
Testamentary trusts take effect after death, managing inheritances for children, spouses, or beneficiaries.
Expert guidance is essential. A CFP® professional and estate attorney can help you choose and set up the right structure.

Why Consider a Trust?

A trust puts you in control, so your money works harder for your family’s future. At Domain Money, we help our clients understand how a trust can fit into a broader estate and financial strategy.

If you own a home, hold retirement accounts, or want to ensure your kids are cared for down the line, a trust might help you:

Protect assets from creditors, lawsuits, or divorce.
Ensure dependents are cared for.
Keep financial affairs private by avoiding probate.
Reduce family conflicts with clear instructions.

Revocable vs. irrevocable trusts

Differences	Revocable Trusts	Irrevocable Trusts
Control	You can change or dissolve anytime during your lifetime	You generally give up control once assets are transferred
Flexibility	High — adjust beneficiaries, instructions, or assets	Low — changes are limited and usually require approval
Asset Protection	Minimal — assets remain yours and are reachable by creditors	Strong — assets may provide creditor protection (if allowed under state law)
Estate Taxes	Assets stay in your taxable estate	Assets may be excluded, reducing estate taxes

Types of irrevocable trusts

Irrevocable trusts are designed to protect your assets and help you plan for the future. Each type serves a different purpose—from shielding life insurance proceeds from estate taxes to preserving wealth for future generations. While you give up some control, these trusts can provide strong protection and create a clear path for transferring assets according to your goals.

Working with a CFP® professional is important. Establishing these trusts correctly can help make sure that you can maximize their benefits for asset protection, tax planning, and leaving a legacy.

Irrevocable life insurance trusts

An irrevocable life insurance trust (ILIT) keeps life insurance proceeds outside the taxable estate if structured correctly.

Grantor Retained Annuity Trusts (GRAT)

A GRAT lets you transfer assets to beneficiaries while keeping an income stream for a set term. It’s often used for assets expected to grow—like company stock or real estate.

You receive annuity payments during the trust term, and the remaining assets go to beneficiaries. If the assets grow faster than expected, the extra value passes tax-free. Many families use rolling GRATs to continuously transfer wealth to the next generation.

Qualified Personal Residence Trust (QPRT)

A QPRT lets you transfer your home to beneficiaries while continuing to live there for a set period. It can help reduce gift taxes and ensure your home passes efficiently to heirs.

You maintain rights to live in the home and cover taxes, insurance, and maintenance. Once the term ends, the house passes to beneficiaries. This is popular for primary residences and vacation homes in high-value markets.

Special Needs Trusts

Properly drafted special needs trusts can provide financial support for a loved one with disabilities without jeopardizing eligibility for government benefits (i.e. Medicaid), often covering supplemental expenses like vacations, education, or personal care.

There are two main types: third-party trusts funded by family and first-party trusts funded by the beneficiary’s assets. Both preserve benefits while providing financial security.

Domestic Asset Protection Trusts (DAPT)

DAPTs shield assets from future creditors while keeping them in the U.S. Available in select states, they’re useful for professionals in high-liability fields or anyone concerned about lawsuits.

You transfer assets to an independent trustee; after a waiting period, they gain creditor protection.

Generation Skipping Trusts

Generation-skipping trusts help pass wealth to grandchildren or later generations, reducing estate taxes at each step. Your children can still benefit during their lifetime, but don’t own the assets outright, avoiding estate taxes when they pass away.

Some trusts, called dynasty trusts, can last for centuries, protecting family wealth for multiple generations while providing income or access for education, health, and support along the way.

Types of revocable trusts

Revocable trusts are a cornerstone of estate planning because they let you maintain control over your assets while setting up a plan for the future. You can adjust, add, or remove assets at any time, making them ideal for people who want flexibility. These trusts help your heirs avoid probate, keep your financial affairs private, and ensure your wishes are followed smoothly.

Living trusts

A living trust, or revocable living trust, is the most common type. You create a trust and typically serve as trustee, which means you control the assets during your lifetime. You can change beneficiaries, add new assets, or adjust distribution instructions at any time. If you become incapacitated, a successor trustee can step in, keeping everything on track without court intervention.

Pour-over trusts

A pour-over trust works alongside your will to capture any assets not explicitly placed in your living trust. Think of it as a safety net: anything you forget to transfer during your lifetime automatically “pours over” into the trust after your death. This helps make sure all your assets are distributed according to your plan.

Joint revocable trusts

Joint revocable trusts are created by two people (usually spouses) to manage any assets they share. These simplify estate management, especially if one partner passes away, by keeping assets in a single trust. They also help avoid probate and maintain continuity of management during life changes.

Types of Charitable Trusts

Charitable trusts let you support causes you care about while also addressing your income needs and estate planning goals. They can provide some immediate tax advantages, create income streams for you or your family, and deliver the personal satisfaction of making a lasting impact.

The two main types work in opposite ways. Charitable remainder trusts give income to you or your beneficiaries first, with the remainder going to charity. Charitable lead trusts prioritize giving to charity upfront, with remaining assets eventually passing to heirs. Each type has distinct benefits depending on your goals, timeline, and tax situation.

Charitable remainder trusts

A charitable remainder trust provides income to you or your beneficiaries for a set term or lifetime, with remaining assets eventually going to charity. Funding with appreciated assets lets the trust sell tax-free and reinvest to generate income while supporting your charitable goals.

CRTs come in two flavors:

Charitable Remainder Annuity trusts (CRATs) pay a fixed dollar amount annually, offering predictable income.

Charitable Remainder Unitrusts (CRUTs) pay a percentage of the trust’s value each year, which can grow with your investments and help protect against inflation.

For some people, this structure may serve as a tax-advantaged income stream in retirement.

Charitable lead trusts (CLT's)

Charitable lead trusts work in reverse: they provide payments to charity for a set term, with remaining assets passing to your heirs. This can be especially effective for assets expected to grow significantly over time.

CLTs can pay a fixed amount to a charity as a Charitable Lead Annuity Trust (CLAT) or a percentage of the trust’s value as a Charitable Lead Unitrust (CLUT). Properly structured, they allow you to support your favorite causes while minimizing gift or estate taxes and preserving wealth for your family.

They require careful planning but can balance charitable impact with family security.

Testamentary trusts

A testamentary trust is created through your will and takes effect after you pass away. Unlike living trusts, which are set up during your lifetime, these trusts offer a straightforward way to provide ongoing management and protection for your beneficiaries without the upfront complexity.

These trusts are especially useful for minor children, beneficiaries who may not be ready to manage a large inheritance, or a surviving spouse, while still ensuring assets eventually reach your intended heirs. You can include multiple testamentary trusts in one will, each designed for specific beneficiaries or purposes, giving you flexibility as your family situation evolves.

Discretionary trusts

These trusts give the trustee flexibility to decide how and when to distribute funds to beneficiaries. This is ideal if you want to provide support while letting a trusted professional manage timing and amounts based on each beneficiary’s needs. For example, a trustee could prioritize education or healthcare expenses before other distributions.

Spendthrift trusts

Spendthrift trusts protect assets from being accessed too quickly by beneficiaries or claimed by their creditors. This can be useful if a beneficiary is young, financially inexperienced, or in a profession with high liability. The trust helps ensure the inheritance lasts and is used responsibly.

Minor-focused trusts

These trusts are designed specifically for children. Funds can be released at certain ages, milestones, or for specific purposes like schooling, health, or first-home purchases. This ensures your children benefit from the inheritance in a way that matches your intentions.

Surviving spouse trusts

These trusts provide income or access to assets for a surviving spouse while protecting the remainder for children or other heirs. They balance ongoing support for your spouse with long-term inheritance goals.

How to Choose the Right Trust (Checklist)

Define your primary goal (flexibility, protection, or legacy).
Identify your key assets (home, investments, insurance).
Consider your beneficiaries’ needs (minor children, spouse, special needs).
Review potential tax implications.
Consult a CFP® professional and estate attorney.
Revisit regularly as laws and life circumstances change.

Protect Your Legacy with the Right Trust

Choosing a trust is about aligning your estate plan with your values and goals. Revocable trusts give you flexibility today, while irrevocable and specialized trusts offer stronger protection for tomorrow. The right structure can help safeguard your family, support causes you care about, and provide peace of mind.

Working with an experienced financial advisor helps you avoid mistakes and build a plan that adapts as life changes.

Ready to explore your options?

Book a Free Strategy Session with us today

This information is for educational purposes only and should not be considered investment advice or recommendation. Each person’s financial situation is unique to them and should be evaluated before making any investment decision.

Frequently Asked Questions (FAQ):

What are the four major types of trusts?

The most common trusts include living trusts, testamentary trusts, revocable trusts, and irrevocable trusts. Living trusts are active while you’re alive, while testamentary trusts are created through your will and take effect after you pass away. Revocable trusts let you maintain control and make changes, whereas irrevocable trusts generally cannot be altered once established.

What is the best type of trust to have?

There’s no one-size-fits-all answer. If protecting assets from creditors or minimizing estate taxes is a priority, an irrevocable trust may make sense. If maintaining flexibility and control over your assets is more important, a revocable trust might be the better choice.

Which is better: revocable or irrevocable trust?

It depends on your goals. Revocable trusts give you flexibility and control, letting you adjust assets and beneficiaries as your life changes. Irrevocable trusts offer stronger protection from creditors and potential tax advantages, but require giving up some control over the assets. Many estate plans use a combination of both to balance flexibility and protection.

What type of trust avoids all taxes?

No trust completely eliminates taxes. Certain irrevocable trusts can help reduce estate taxes by removing assets from your taxable estate, but income taxes on trust earnings may still apply. The key is using trusts strategically within a comprehensive plan to help manage tax exposure and protect your assets.

About The Author

Alicija Dearth, CFP®, is a Certified Financial Planner at Domain Money. She guides clients through retirement and estate planning, with expertise in aligning wealth strategies across generations. Alicija’s focus is creating personalized, actionable plans that give families peace of mind for today and tomorrow.

About Domain Money

Domain Money is a flat-fee financial planning firm built for high-earning professionals who want to make smarter money moves with confidence. Our CFP® professionals create personalized, integrated strategies that cover taxes, investments, retirement, real estate, equity compensation, insurance, and more—all for one transparent membership fee. Unlike traditional advisors who charge based on assets, we provide unbiased advice, actionable recommendations, and ongoing guidance designed to evolve with your life.

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Types of Trusts: Revocable, Irrevocable, Special Needs, Charitable