Even with recent changes in estate tax laws, trusts are frequently used to minimize the size of the grantor's present or future estate, thereby reducing estate taxes due. Through a properly structured trust, the grantor may be able to keep future appreciation in the transferred property outside of their taxable estate. An example of such a trust is an irrevocable life insurance trust which often has the life insurance policy and then its proceeds as the sole asset. During the grantor's life, annual gifts of cash are given to the trust so the trustee can make premium payments on the policy. Using appropriate language, the proceeds remain out of the grantor's estate and may be income tax free as well.
Trusts serve many useful purposes.
However, the law of trusts and estates is a complex area which is constantly changing. Consulting with your legal and tax professional will help to ensure that the trust you establish provides the benefits you intend.