Nine Types of Trusts for High-Net-Worth Estates
Trusts can help high-net-worth estate owners protect their assets, minimize taxes for beneficiaries and ensure their money goes where they want it to.


Estate planning is crucial for high-net-worth individuals who want to protect their assets and pass their legacy on to loved ones after death.
High-net-worth (HNW) individuals have unique tax and non-tax estate planning needs, which require careful consideration of various strategies to protect their assets and minimize tax liabilities.
One of the most effective ways to protect HNW estates is through the use of different types of trusts, which are legal entities that hold assets for the benefit of designated beneficiaries.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Types of trusts
1. Intentionally defective grantor trust
Intentionally defective grantor trusts (IDGTs) are irrevocable trusts that are structured to be intentionally disregarded for income tax purposes yet still recognized to remove the assets from the grantor’s gross estate at death. By doing so, they can transfer wealth to beneficiaries while minimizing the impact of the estate tax.
Assume you own assets you expect to significantly appreciate over the years. You want to shift the future value from your gross estate to avoid the death taxes on the appreciation. Using your available gift tax exclusion you transfer the asset to the trust and avoid paying any federal gift tax. If the value of the gift exceeds the available gift tax exclusion, the taxpayer may sell the asset to the trust on an installment sale basis for a long-term note (say, 20 years) and incur no capital gains due to the grantor tax status of the trust. As the assets held in the trust grow in value, the death tax on such growth is avoided for multiple generations.
2. Revocable and irrevocable trusts
Revocable and irrevocable trusts are two different types of trusts that can be used in estate planning. Revocable trusts are generally used to avoid the process of probate and allow the grantor to make changes to the trust at any time during his or her lifetime.
Irrevocable trusts cannot be changed once they are established unless they are subject to special decanting rules provided in many states, or unless a court permits the trust to be amended, usually with the consent of the impacted beneficiaries.
Irrevocable trusts are often used for tax planning and asset protection purposes, while revocable trusts are more flexible, allowing the trust to be changed by written amendment by the grantor/creator.
3. Charitable lead trust
Charitable lead trusts are trusts that provide income to a charity for a certain period, after which the remaining assets are passed on to beneficiaries. This type of trust is beneficial for those who want to make charitable donations and still provide for their loved ones.
4. Charitable remainder trust
Charitable remainder trusts are trusts that provide income to beneficiaries for a certain period, after which the remaining assets then pass on to the designated charity. This type of trust is beneficial for those who want to provide for themselves and then their loved ones while also supporting a charitable cause.
5. Crummey trust
A Crummey trust is a type of irrevocable trust that allows the grantor to transfer assets to beneficiaries in the future, while also qualifying for the annual gift tax exemption. The beneficiaries have a limited period (usually 30 days) to withdraw the gifted amount, after which it becomes part of the trust.
The Crummey trust is generally the vehicle used when a life insurance policy is being purchased and the insured desires to remove the proceeds at death from being included in his or her gross estate, and to have the death benefits managed to protect same from creditors of the beneficiaries.
6. Generation-skipping trust
Generation-skipping trusts are trusts that allow the grantor to transfer assets to beneficiaries who are two or more generations younger than the grantor. This type of trust is beneficial for those who want to provide for their grandchildren or great-grandchildren and defer the imposition of estate tax for multiple generations.
7. Grantor retained annuity trust
A grantor retained annuity trust (GRAT) is a type of irrevocable trust that allows the grantor to transfer assets to beneficiaries while still retaining the right to receive income from the trust for a certain period. This type of trust is beneficial for those who want to transfer assets to their heirs while also retaining some control over the assets.
If the donor dies within the time he or she is permitted to receive the income stream, the full value of the assets in the GRAT is included in the grantor’s gross estate. If the grantor lives beyond the time he or she is to receive the income, then the full value of the trust property is excluded from the grantor’s gross estate and no estate tax is imposed.
8. Asset protection trust
The asset protection trust (APT) is used by HNW families to protect trust assets from future unknown unforeseeable lawsuit creditors and predators. The APT is a trust created for the by the grantor and for the grantor, during the grantor’s lifetime — so called “self-settled spendthrift trust.”
Twenty states plus many offshore jurisdictions have passed legislation allowing for the grantor to establish and remain a discretionary beneficiary of the trust while protecting the assets inside the trust from future judgment creditors.
Special rules apply to prevent a grantor from creating an APT to defraud his or her known, expected or current creditors, and these rules must be carefully analyzed to ensure they are not violated when establishing an APT.
9. H.E.L.P. Trust
A home equity and lifestyle protection trust protects the equity in your personal residence and vacation homes. Unless you live in a state like Texas, Florida or Tennessee, your state has a miserly homestead exemption against lawsuit creditors seeking to take your personal residence to satisfy a legal judgment. No exemption exists for vacation homes.
The H.E.L.P. Trust solves this conundrum by structuring the ownership of these two asset classes in such a way as to convert you from an “owner” of these properties to a “tenant” of these properties, thereby precluding a future unknown lawsuit creditor from taking these properties in the absence of a fraudulent transfer. You can watch a video here that describes how the H.E.L.P. Trust works.
The right direction
The nine types of trusts mentioned here are just a few of the options available to high-net-worth individuals to protect assets and minimize tax liabilities. When it comes to estate planning for HNW estates, it's essential to work with an attorney specializing in this area of law.
The estate planning attorneys at Falcon Rappaport & Berkman can help you protect your assets from future unknown judgment creditors, preserving your legacy for your loved ones for generations to come.
Related Content
- How to Protect Your Digital Assets From Estate Tax
- What Assets Should You Put (or Not Put) in Your Trust?
- You've Got a Trust: Now Who Should Be the Successor Trustee?
- How to Fix a Trust Dilemma to Prevent a Tax Bomb
- How to Handle Irrevocable Trust Assets Tax-Efficiently
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jeffrey M. Verdon, Esq. is the lead asset protection and tax partner at the national full-service law firm of Falcon Rappaport & Berkman. With more than 30 years of experience in designing and implementing integrated estate planning and asset protection structures, Mr. Verdon serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives. Over the past four years, he has contributed 25 articles to the Kiplinger Building Wealth online platform.
-
The 401(k) Mistake That Could Cost You Millions in Retirement Savings
Thinking about reducing your 401(K) contributions in the current market? Here are six reasons why you may want to reconsider.
-
What the HECM? Combine It With a QLAC and See What Happens
Combining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.
-
The 401(k) Mistake That Could Cost You Millions in Retirement Savings
Thinking about reducing your 401(K) contributions in the current market? Here are six reasons why you may want to reconsider.
-
What the HECM? Combine It With a QLAC and See What Happens
Combining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.
-
721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
Potential investors need to understand the crucial distinction between a REIT's option to buy a Delaware statutory trust's property and its obligation.
-
I'm an Insurance Expert: Yes, You Need Life Insurance Even if the Kids Are Grown and the House Is Paid Off
Life insurance isn't about you. It's about providing for loved ones and covering expenses after you're gone. Here are five key reasons to have it.
-
Stock Market Today: Tesla Drags on Stocks Amid Musk-Trump Feud
Sentiment has soured between President Trump and his once-loyal ally, Tesla CEO Elon Musk.
-
7 Rules Frequent Flyers Swear By
From dodging long lines to avoiding bad coffee, these clever travel rules can help you save time, stay healthy and reduce stress every time you fly.
-
I'm 60 With a $4.2 Million Nest Egg. Can I Stop Saving and Start Spending Until I Retire at 65?
Should I continue contributing to my 401(k) or treat myself now?
-
These Jobs Reduce Your Alzheimer's Risk: How You Can Benefit
Two jobs are linked to a lower Alzheimer's risk. Even if you do a different kind of work or are retired, these jobs show how to keep your mind sharp.