When people first meet with an estate planning attorney, one of the first questions they often ask is, “What kind of trust do I need?” The answer is that there isn’t a one-size-fits-all. Choosing the right trust is about matching goals — whether that’s asset protection, tax efficiency, care for loved ones, or charitable giving — to the right legal structure.
At Estate Preservation Law Offices, we help clients understand not just what each trust does, but how it fits into the broader picture of estate and legacy planning. Below, we’ll explore several types of trusts and how each can serve your unique situation.
Revocable Trusts: Flexibility and Control
A revocable trust, also known as a living trust, is one of the most versatile tools in estate planning. These trusts can serve two main purposes during one’s life: the first is to allow a person, the grantor, to maintain complete control and use of personal assets during the grantor’s lifetime; the second is to designate someone else, a trustee, to make financial decisions on the grantor’s behalf should the grantor become incapacitated and unable to make decisions. Revocable trusts are especially valuable because they allow one’s estate to avoid probate — a legal procedure which can be time consuming, expensive, and susceptible to public process.
What makes these trusts a valuable tool is that they are highly flexible, giving the grantor the power to change, amend, or revoke the trust as circumstances evolve, such as in times of sickness, health, and aging. While a revocable trust can be an excellent foundation for most estate plans, it doesn’t offer protection from creditors or the costs of long-term care because the grantor still legally “owns” the assets. It is, however, an excellent choice if one’s primary goals are privacy, flexibility, and ongoing protection for young, disabled or otherwise vulnerable beneficiaries.
Irrevocable Trusts: Strength in Structure
An irrevocable trust offers something a revocable trust cannot: true asset protection.
Once established and funded, one generally cannot change or dissolve the trust, forfeiting ownership and direct authority over the trust and its assets. While loss of control may be unnerving to some, it is what gives the trust strength. Unlike a revocable trust where the assets are still legally owned by the grantor, an irrevocable trust’s listed assets are not. However, they are typically protected from creditors, lawsuits, and certain tax liabilities.
Irrevocable trusts are often used by those who wish to reduce their taxable estates, protect their assets from potential nursing home or long-term care costs, or ensure long-term financial security for their families. By separating ownership and control, these trusts have the power to create a protective barrier that helps preserve the grantor’s wealth for future generations. While they are less flexible than revocable trusts, they can provide peace of mind that one’s assets are secure should one’s health and circumstances change. They can also be engineered to include particular ongoing rights by the grantor, such as the ability to change future beneficiaries and remove and replace trustees, which negates some of the loss of control.
Testamentary Trusts: Built Into the Will
A testamentary trust is created through a person’s will and only takes effect after that person’s death. In contemporary estate planning, testamentary trusts are typically avoided in favor of living trusts because of the involvement of the probate court in the initial establishment of the trust after death. The one notable exception is in spousal nursing home planning, where testamentary trusts are deliberately and strategically used to take advantage of Medicaid regulations that classify such trusts as “noncountable” or protected assets for a surviving spouse.
When used and funded correctly by married couples, testamentary trusts allow for protection of significant amounts of assets without either spouse losing access to the funds.
Supplemental Needs Trusts: Planning for a Special Future
A supplemental needs trust (also called a special needs trust) is designed to support individuals with disabilities without affecting their eligibility for government benefits. The trust holds assets that can be used to enhance the beneficiary’s quality of life, covering expenses while preserving access to essential public assistance. This type of trust is a vital planning tool for families who want to provide long-term financial security for a loved one with special needs.
Nominee (Agency) Trusts: The Hidden Framework
A nominee or agency trust is a simple arrangement between beneficiaries and trustees, often used to hold legal title to property on behalf of its actual owners. The trustee acts merely as an agent or “nominee” carrying out instructions, but cannot exercise independent control. These trusts are commonly used in real estate transactions for privacy, ease of transfer, or estate planning purposes. They are also used in more complex planning structures to position assets to flow optimally, particularly between a married couple, to maximize tax sheltering and nursing home protection.
Choosing the Right Trust for You
Every client’s situation is different, which is why there’s no single “best” trust. The right choice depends on what you want to achieve — whether that’s flexibility, asset protection, tax efficiency, or long-term security for your loved ones. The key is to start with your goals and build outward from there.
At Estate Preservation Law Offices, we don’t just draft legal documents; we create comprehensive strategies that align with your values and vision for the future. If you’re ready to explore which trust is right for you, we’re here to guide you through every step of the process.