Unlocking the Power of Trusts: 10 Different Trusts & How to Use Them

In this episode of the A Wiser Retirement® Podcast, Estate Planning Attorney Arun Gupta joins Shawna Theriault, CFP®, CPA, CDFA® to demystify trusts, what they are, who they’re for, and how 10 common trust types work in real life.

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What Is a Trust, And Why It’s Not Just for the Ultra-Wealthy

A trust is a legal arrangement where a grantor transfers assets to a trustee to manage for beneficiaries under rules in the trust document. Think of it like a contract governing how assets are used and distributed, sometimes during your lifetime, often after. Trusts aren’t only for the ultra-wealthy; they can simplify transfers, provide privacy, shield vulnerable loved ones, and in certain cases reduce taxes.

Revocable vs. Irrevocable: The Core Difference

Revocable Living Trust (RLT): An “extension of you.” You can amend or revoke it and it uses your SSN while you’re alive. Big perks: probate avoidance, privacy, and smoother administration.

Irrevocable Trust: Generally permanent once funded and treated as its own entity. You give up control in exchange for potential benefits like asset separation or estate/gift tax efficiency. Some modifications are possible in limited circumstances, but assume permanence going in.

Funding the Trust: The Step Most People Skip

Creating a trust is step one; funding it is step two. Retitle assets to the trust or update beneficiary designations. Your attorney, advisor, and CPA should coordinate so documents match your accounts.

10 Trust Types You’ll Hear About And What They Do

Revocable Living Trust (RLT) – Most common vehicle; keeps control while alive, becomes irrevocable at death, avoids probate, preserves privacy.

Irrevocable Trust – Permanent structure to separate assets and potentially improve tax outcomes; often drafted as grantor (you pay income tax) by design.

Testamentary Trust – Created under your will at death; common for minors; gets its own tax ID and is irrevocable once funded.

Charitable Remainder Trust (CRT: CRAT/CRUT) – Fund now, receive income for life/term, get a current tax deduction, and the remainder goes to charity; requires annual administration and minimum payouts.

Special Needs Trust (SNT) – Preserves a beneficiary’s eligibility for government benefits while allowing supplemental support from trust assets; strict drafting and administration matter.

Spousal Lifetime Access Trust (SLAT) – Irrevocable trust for your spouse’s benefit that removes assets from your taxable estate while preserving indirect access through your spouse; avoid “mirror” SLATs.

Generation-Skipping Trust (GST) – Passes wealth to grandchildren or lower generations while managing GST tax; precise provisions let trustees preserve GST-exempt and non-exempt portions.

Qualified Personal Residence Trust (QPRT) – Moves a home at a discounted gift value for tax purposes; you retain the right to live there for a term, then ownership shifts to beneficiaries. Trade-offs include loss of step-up in basis and term-survival risk.

Grantor Retained Annuity Trust (GRAT) – Contribute growth assets, receive a fixed annuity for a term, and pass appreciation to heirs—potentially shifting growth outside your estate; technically intensive.

Irrevocable Life Insurance Trust (ILIT) – Keeps life insurance proceeds outside your taxable estate by having the trust own the policy; requires annual “Crummey” notices and premium procedures.

Coordination Is Everything

Have your attorney, financial advisor, and CPA review your plan regularly. Marriage, divorce, births, deaths, new assets, or new laws can all change the optimal structure. Do you have any questions about different types of trusts? We would be happy to help you learn more today!

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Timestamps:
00:00 Intro
01:00 What is a Trust?
04:22 Revocable vs. Irrevocable Trusts
09:52 Benefits of Revocable Living Trusts
17:33 Testamentary and Charitable Trusts
23:05 Special Needs and Spousal Trusts
30:37 Generation-Skipping and Residence Trusts
38:43 Life Insurance Trusts and Final Thoughts