Trust types and how they serve your financial plan
Setting up a trust gives you control over your assets—how, when, and to whom they’re distributed. Here’s a practical guide to the most common trust types and how they fit into your estate and tax strategy.
1. Revocable (living) trust - Most Common
What it is: A trust you create while alive that you can change or cancel anytime.
Why you’d use it:
Bypass probate.
Keep your estate private.
Stay flexible with asset and beneficiary changes.
Most commonly seen to allow real estate & business interests to skip probate.
What it doesn’t do:
No tax or creditor protection—assets are still part of your taxable estate.
2. Irrevocable trust
What it is: You give up control; the trust can’t be changed without beneficiary consent or court approval.
Why you’d use it:
Shrinks your estate to reduce taxes.
Keeps assets safe from lawsuits or creditors.
Types include:
Life insurance trusts (ILIT) – holds insurance to remove its payout from your estate.
Crummey trust – uses annual gift tax exclusions for gifting.
Asset‑protection & dynasty trusts – shield assets and build generational wealth.
3. Testamentary trust
What it is: Created in your will; starts working only after your death.
Why it works:
Good for caring for minor children or controlling payouts.
Not private; still goes through probate.
Bonus: Specialized irrevocable trusts
Special needs trust: Supports a loved one with disabilities without cost to their public benefits.
Spendthrift trust: Prevents reckless spending and shields assets from creditors.
QTIP trust: Ideal for blended families: spouse gets income, kids inherit later. Uses marital tax deduction.
Charitable Trusts: CRT — you get income; charity gets remainder. or CLT — charity gets income now; heirs get remainder
Dynasty trust: Irrevocable structure that can last generations. Reduces transfer taxes over time, keeps assets shielded
Final take
Revocable trusts = flexibility and privacy.
Irrevocable trusts = tax/credit protection, but less control.
Specialized trusts match specific needs: caregiving, blended family planning, wealth preservation.
Action steps: Talk with an estate planning advisor. They’ll structure the trust or combination of trusts that fits your situation.
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About the author: Finn Price, CPFA, CEPA, is a business owner and wealth manager at Railroad Investment Group. He helps successful entrepreneurs & individuals with concentrated stock positions in their 30s, 40s and 50s build, organize, protect and transfer their wealth.
Note: this article is general guidance and education, not advice. Consult your money person or your attorney for financial, tax, and legal advice specific to your situation.
Securities and advisory services offered through LPL Financial, a registered investment Advisor, Member FINRA/SIPC.
