Skip to main content


A trust is an estate planning tool in which you allow a third party (called a trustee) to hold your assets on behalf of your beneficiaries. Several types exist.

Trusts overview

What is a trust, and do you need one? These are good questions, but the answers depend on your goals for your estate.

Each kind of trust can help you meet a different goal, and you can set up as many as you need to protect your assets and your heirs. Some trusts can even be useful for small estates.

The basics of trusts

A trust is a legal arrangement that gives a person or business the authority to hold assets on your behalf. Depending on the type, a trust may also include instructions on what to do with the assets.

The person setting up the trust is the grantor (that’s you). The person or business managing the trust is the trustee. In many cases, you can be trustee while you’re alive. Lastly, the people or organizations getting assets from the trust are the beneficiaries.

Benefits of trusts in estate planning

Trusts offer several benefits to you and your heirs, especially if your estate is large.

  • Avoid probate. Probate can be lengthy and expensive, and skipping it may let your heirs get their inheritance faster and keep more of it.

  • Increase privacy. Probate is also a public process, so avoiding it can keep your estate private.

  • Lower estate taxes. Certain trusts may not be considered part of your taxable estate.

Revocable vs irrevocable trusts

A trust can take one of two forms: revocable or irrevocable.

A revocable trust, also called a living trust, lets you stay in control while you’re alive. You can change the terms and even dissolve the trust at any time. Assets often pass to heirs outside of probate, but may still be considered taxable.

An irrevocable trust is set in stone once you sign the paperwork. You no longer own the assets, and you can’t change or dissolve the trust for any reason. It will avoid estate taxes, but beneficiaries may still have to pay income taxes on distributions.

Key types of trusts

Each type of trust offers different advantages.

  • A bypass or credit shelter trust provides income to a surviving spouse, but doesn’t become part of his or estate. When your spouse dies, any assets pass to your successor beneficiaries.

  • The generation-skipping trust distributes assets directly to your grandchildren, great-grandchildren, etc.

  • A special needs trust supports a person who is disabled or otherwise unable to support themselves.

  • Spendthrift trusts allow you to control your heirs’ spending. For example, you can set up a distribution schedule, or name specific expenses the trust will pay.

Other trust types include charitable remainder trusts, life insurance trusts, and even pet trusts.

What’s best for you depends on your goals—both for your estate, and your heirs. Remember, you can set up as many trusts as you need to meet your goals.

Before setting up your trust(s), you may want to get advice from an estate planning lawyer in your state. Laws governing trusts vary a lot by location.