Trusts show up in almost every advanced life insurance case. You don’t need to be an attorney to work with them, but you do need to know the basic types and what each one does. Here’s a plain-English glossary.
Key takeaways
- A revocable trust avoids probate but offers no tax benefits or creditor protection.
- An irrevocable trust, including an ILIT, can remove assets from the taxable estate and protect them from the creator’s creditors.
- SLATs and dynasty trusts let families keep access to or pass wealth across generations without estate inclusion.
Trusts were in use long before wills, and they remain one of the most important tools in estate planning.
The basics of a trust
A trust is created when a person (the creator, maker or grantor) puts legal title to property in the name of a trustee, who holds and manages it for the benefit of others (the beneficiaries) according to the trust document.
- An inter vivos trust is created during the creator’s life.
- A testamentary trust is created by the creator’s will after death.
Revocable vs. irrevocable trusts
Revocable trust: The creator can change or revoke it at any time and add or withdraw property at will. It keeps property out of probate, but provides no tax advantages and no protection from the creator’s creditors.
Irrevocable trust: Property is removed from the creator’s control. In exchange, it is generally kept out of the creator’s taxable estate and protected from the creator’s creditors.
ILIT (irrevocable life insurance trust): An irrevocable trust set up primarily to own life insurance, though it can usually hold other assets too. Choosing the trustee is an important decision; see our article on choosing an ILIT trustee.
Advanced trust types
Grantor (intentionally defective) trust: An irrevocable trust where income taxes flow back to the creator, while the assets stay outside the creator’s taxable estate. Most irrevocable trusts are grantor trusts. Our article on grantor trusts explains why that matters.
SLAT (spousal lifetime access trust): An irrevocable trust that gives the creator’s spouse a lifetime interest, with the remainder usually going to children. The spouse can have generous access during life, but what’s left isn’t included in the spouse’s taxable estate.
Dynasty (generation-skipping) trust: Each generation of beneficiaries has only a lifetime interest, which passes to the next generation at death. Because each interest ends at death, the assets are not included in any beneficiary’s taxable estate.
Why this matters for your cases
Knowing these terms helps you spot planning opportunities and talk comfortably with a client’s attorney. Even with the federal exemption at $15 million per person, trusts remain valuable for probate avoidance, creditor protection, control and state estate taxes. Contact us with questions on any trust-owned case.
Frequently asked questions
What’s the difference between a revocable and an irrevocable trust?
A revocable trust can be changed at any time and avoids probate but offers no tax or creditor benefits. An irrevocable trust generally can’t be changed but can remove assets from the taxable estate and protect them from creditors.
What is an ILIT?
An irrevocable life insurance trust is set up mainly to own life insurance so the death benefit stays out of the insured’s taxable estate.
What is a SLAT?
A spousal lifetime access trust is an irrevocable trust that lets the creator’s spouse benefit during life, with the remainder passing to other beneficiaries outside the spouse’s estate.
Reviewed by Tim Fuller on 2026-09-26
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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