Effective July 1, 2026, German Law in Grand Forks, ND merged with Thompson Law in Sioux Falls, SD. Going forward, both offices will be under the Thompson Law name and continue to serve their clients and communities with excellence.
15 Common Trusts Explained - Thompson Law, PLLC

Thompson Law, PLLC

Estate & Business Planning Attorneys in Sioux Falls, South Dakota

Sioux Falls

605-362-9100

Grand Forks

701-738-0060
Estate Planning Attorneys Licensed in South Dakota, North Dakota, Minnesota, Iowa, and Nebraska

15 Common Trusts Explained

by

Common trusts

While most people have at least heard of trusts, the actual process of creating one often feels overwhelming. A trust can be an extremely valuable estate planning tool but choosing the right type of trust is essential to ensure that it aligns with your specific needs and goals. If you are considering adding a trust to your estate plan, it is helpful to understand the many types of trusts available and what they are designed to accomplish. Always work with an experienced estate planning attorney when creating a trust to make sure you establish the right type of trust and that the correct language is used in the trust agreement. To get you started, however, an attorney at Thompson Law explains 15 common trusts and how they might fit into your North Dakota estate plan.

Common Trusts

Trusts are far more diverse than many people realize with each type of trust serving a unique purpose. The complexity and variety of trust available makes it imperative to work closely with an experienced attorney when incorporating a trust into your estate plan. The following, however, is a basic overview of 15 common trusts:

  1. Testamentary Trusts. A testamentary trust is established through provisions in a Last Will and Testament and does not take effect until after the death of the person who created it, known as the Trustor. Because a Will can be revoked during life, a testamentary trust remains revocable until the Trustor’s death. These trusts are often used by parents of young children who want to provide oversight and protection of inherited assets until the children reach adulthood.
  2. Living Trusts. Also known as “inter vivos” trusts, living trusts are created and become effective during the Trustor’s lifetime. A living trust can be either revocable or irrevocable, depending on the Trustor’s objectives. Living trusts are among the most widely used estate planning tools because they can help avoid probate, assist with incapacity planning, and offer flexibility and control over how assets are managed.
  3. Revocable Trusts. A revocable trust allows the Trustor to change terms, add or remove assets, and even dissolve the trust entirely during life. Because of this flexibility, revocable trusts are often used to avoid probate, plan for incapacity, and streamline asset transfers. Upon the Trustor’s death, the trust typically becomes irrevocable.
  4. Irrevocable Trusts. In contrast, an irrevocable trust cannot be easily changed or revoked once it has been executed. State laws often prevent irrevocable trusts from being altered without court approval. While less flexible, irrevocable trusts provide powerful benefits, including creditor protection, tax advantages, and the ability to shield assets for future generations.
  5. Constructive Trusts. A constructive trust is not a traditional trust created by a Trustor. Instead, the trust is implied and formally imposed by a court. Judges use this remedy when fairness dictates that property held by one person should rightfully belong to another, even if no formal trust agreement exists. Constructive trusts often arise in cases of fraud, undue influence, or misappropriation of property.
  6. Asset Protection Trusts. An asset protection trust is generally irrevocable and is designed to safeguard property from future creditors. People frequently look to offshore jurisdictions for these types of trusts, since domestic versions are limited by state law. While the Trustor usually cannot be a direct beneficiary, these trusts can preserve family wealth over time.
  7. Special Needs Trusts. A special needs trust ensures that a loved one with disabilities can receive financial support without losing eligibility for essential public benefits such as Medicaid or Supplemental Security Income. Funds held in this trust can be used for expenses not covered by government programs, such as travel, therapy, or entertainment.
  8. Charitable Trusts. Charitable trusts allow donors to support a cause while also benefiting from tax advantages. Common options include charitable lead trusts and charitable remainder trusts, which combine charitable giving with family estate planning. These trusts can reduce estate tax exposure while furthering philanthropic goals.
  9. Spendthrift Trusts. A spendthrift trust prevents beneficiaries from selling or borrowing against their interest in the trust before distributions are made. Creditors of the beneficiary are also restricted from reaching into the trust while assets remain under Trustee control, making this type of trust valuable when beneficiaries are not financially responsible.
  10. Totten Trusts. A Totten trust, sometimes called a “Payable on Death” account, is created when a bank account or similar asset includes a beneficiary designation. The beneficiary does not own the account while the Trustor is alive but automatically inherits the funds at death. These trusts are revocable during life and are a simple way to transfer accounts outside of probate.
  11. Generation-Skipping Trusts. A generation-skipping trust allows assets to pass directly to grandchildren or even later descendants, bypassing the Trustor’s children. This structure can reduce estate taxes and preserve family wealth for future generations. It is often used by high-net-worth families seeking to minimize transfer taxes.
  12. Qualified Personal Residence Trusts (QPRTs). A QPRT is a specialized irrevocable trust that allows a homeowner to transfer a primary residence or vacation property to heirs at a reduced gift tax cost. The Trustor retains the right to live in the home for a specified period, after which ownership passes to beneficiaries. QPRTs are especially useful in locations where real estate appreciates rapidly.
  13. Grantor Retained Annuity Trusts (GRATs). A GRAT allows the Trustor to transfer assets while retaining the right to receive annuity payments for a defined term. At the end of that period, any remaining assets pass to beneficiaries. GRATs are frequently used to shift wealth to the next generation while minimizing gift tax exposure.
  14. Qualified Terminable Interest Property Trusts (QTIPs). A QTIP trust provides income to a surviving spouse for life while preserving the underlying principal for children from a prior relationship or other designated beneficiaries. These trusts are particularly valuable for blended families, as they balance providing for a current spouse with protecting the inheritance of children from a previous marriage.
  15. Life Insurance Trusts. An irrevocable life insurance trust (ILIT) holds life insurance policies outside of the Trustor’s taxable estate. Upon death, the trust receives the insurance proceeds, which can be used to pay estate taxes or provide liquidity for heirs. ILITs are common in larger estates where federal estate tax liability is a concern.

Do You Have Additional Questions about Any of the Common Trusts?

Please join us for an upcoming FREE seminar or webinar. If you have additional questions or concerns about any of the common trust mentioned above, or you would like help incorporating a trust into your estate plan, contact a North Dakota and Minnesota estate planning attorney at Thompson Law by calling 605-362-9100 to schedule an appointment.

Raymond German, Estate Planning Attorney
Latest posts by Raymond German, Estate Planning Attorney (see all)