Understanding the Different Types of Trusts—and How to Know Which One Is Right for You
Many people come to us believing that a trust is either unnecessary or something reserved for the very wealthy. Others assume that “a trust is a trust” and that choosing one is simply a matter of checking a box.
In reality, trusts are one of the most powerful—and most misunderstood—tools in estate planning. The key is understanding why trusts exist and how different types serve different purposes.
Why Trusts Matter
At their core, trusts are designed to create control, clarity, and protection. A properly designed trust can:
- Avoid probate
- Provide continuity if you become incapacitated
- Protect beneficiaries from poor decisions, creditors, or outside influences
- Preserve privacy
- Support tax and long-term care planning strategies
But not all trusts accomplish all of these goals.
Common Types of Trusts—and What They Do
Revocable Living Trust
This is one of the most commonly used trusts for families in Washington and Oregon. It allows you to manage your assets during your lifetime and provides instructions for how those assets are handled if you become incapacitated or after you pass away. It avoids probate when fully funded but does not, by itself, protect assets from long-term care costs or creditors.
Irrevocable Trust
These trusts are often used for asset protection, Medicaid planning, or tax strategies. Because control is limited, they require careful planning and should never be created without experienced legal guidance.
Special Needs Trust
Designed to support a loved one with disabilities without jeopardizing SSI or Medicaid benefits. Without this type of trust, well-intentioned inheritances, or the receipt of unexpected lump sums, can unintentionally cause a loss of benefits.
Testamentary Trust
Created through a will or a trust and activated after death. Often used to control distributions to minors or beneficiaries who may need structure.
Charitable Trusts
Allow families to support causes they care about while potentially receiving tax advantages or lifetime income.
Why the “Right” Trust Matters
Choosing the wrong trust—or using a trust when another solution would be better—can:
- Create tax issues
- Fail to protect assets
- Increase administrative burdens
- Create family conflict
- Undermine your overall estate plan
That’s why trust planning should never be one-size-fits-all.
Guidance Makes the Difference
At Pettis Webber Pacific, we help families understand why a trust may or may not be appropriate—and how it fits into the larger picture of their life, finances, and legacy.
Trusts are tools. Strategy is what makes them effective. Schedule a consultation today.