Creating a Trust

Last Updated: December 30, 2025

A trust is a type of relationship between you and another person (your trustee) who is legally charged with holding and protecting your assets for your benefit or the benefit of the people you chose (i.e., your beneficiaries). If you’re concerned about legal action, or just to help you pass on your property without fuss, a trust can be useful.

While most people think of trusts as a vehicle for the very wealthy, anyone can benefit from a trust. They are administered and managed by a trustee, who can generally be a family member, close friend or bank, for the benefit of your beneficiaries. You can either direct the trustee to use his or her discretion to distribute some or all of the assets of the trust at various times or you can mandate when the trustee must pay out specific amounts to one or more of your beneficiaries.   

However, it’s important to note that when you put assets in the trust with a trustee, you no longer own them — the trustee does. The trust is listed as the title owner, and the assets are managed for the benefit of designated beneficiaries (you can be a beneficiary of your own trust). It is important to note that the law places very strict fiduciary responsibilities on the trustee to ensure that only the beneficiaries you designate can benefit from the assets you contributed to the trust.

When it comes to retirement, a trust can be useful because it can protect your assets in the event of a financial setback. Or, it can also help you manage your money effectively while you’re alive while at the same time potentially passing your assets on without the messy probate process.

Often, trusts can help you better manage your tax situation in retirement — and even after you pass away. The goals of trusts vary according to the type of trust you choose, and why you’re using it. Some common goals for trusts include:

• Legal protection of your assets, including sheltering assets from beneficiaries’ creditors
• Distribution of assets according to your requirements after you pass away
• Distribution of hard-to-divide assets like RVs and vacation homes
• Avoid probate and paperwork later
• Reduce estate taxes or inheritance taxes, depending on the situation
• Provide for children who have special needs
• Flexibility in your asset management plan later

Revocable vs. Irrevocable Trust

When creating a trust during retirement, it’s important to understand the difference between a revocable and irrevocable trust.

Revocable Trust

You can use this flexible type of trust during your lifetime. You can make changes while you’re alive, depending on your goals in retirement and what makes sense for your long-term money management. As long as you’re alive, the assets inside the trust continue to work for your benefit.

A revocable trust can help your loved ones avoid probate after your death, but there are no tax benefits associated with the account, nor does it protect your assets from creditors who might come knocking. It should be also noted that your revocable trust will become irrevocable when you die if not terminated before.

Irrevocable Trust

As you might expect, an irrevocable trust is less flexible than a revocable trust. Once you set it in motion and add assets, it can be extremely difficult to change. However, you get the benefits of asset protection and the assets aren’t subject to estate tax. If you’re single or in a non-married partnership, this type of trust can potentially put you at the mercy of someone else if you change your mind about the conditions of the trust. It can also be problematic if you’re married and get divorced later. A knowledgeable estate attorney can help you review the conditions of the trust and build protections into the paperwork that creates the trust.

If the value of your estate exceeds $15 million in 2026 or $13.99 million in 2025¹ (the estate tax exemption), it can make sense to put the excess in an irrevocable trust, as those assets don’t “count” toward your gross estate for federal estate tax purposes. 

On top of that, assets in an irrevocable trust won’t be included in government benefit calculations, such as those used to determine your Medicare IRMAA surcharges. Although $15 million is a lot of money today, Congress is always playing with this amount. Additionally, inflation can reduce buying power in the future. Being prepared can make a lot of sense.

Other Types of Trusts

As a retiree, you might be interested in other types of trusts, designed for specific purposes. The type of trust you choose might also depend on your children or grandchildren's needs.

When it comes to trusts, there are many types and variations designed to meet a specific need. Check with a knowledgeable estate planning attorney or accountant to determine if you can benefit from having such a trust as part of your estate plan.

Generation Skipping Trust

A generation-skipping trust² is designed to benefit your grandchildren primarily. You can use this trust if you want to make sure your grandchildren receive an inheritance and you aren’t sure about passing your assets to your children or the children of a second or third spouse. Additionally, this trust can be useful if you are divorced and want to make sure your children’s children are taken care of.

Special Needs Trust 

This type of trust is designed to primarily benefit family members that may have special needs (frequently a mental or physical disability). The assets held in trust for their benefit do not interfere with or make them ineligible for Social Security or Medicare. Special Needs Trusts can be a lifesaver to loved ones that may have difficulty caring for themselves but desperately need state help to pay for their expenses.

A Special Needs Trust is necessary to ensure that what you may want to give such a beneficiary merely supplements their life (enriches and comforts them) rather than supplanting their state benefits. If you are more concerned about a child getting what they need after your passing, this type of trust can be useful for ensuring that your assets don’t automatically go to a surviving spouse or former spouse.  

SOURCES

1. “Estate Tax.” IRS, 22 December 2025, https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax. Accessed 23 December 2025.
2. “A Guide to Generation Skipping Trusts (GST Trusts).” Trust & Will, https://trustandwill.com/learn/generation-skipping-trust. Accessed 23 December 2025.