The two most common taxes to avoid are income and estate taxes. Income taxes can be as high as 39.6 percent and, though the threshold for paying any estate tax is $5.25 million, the current top estate tax rate is 40%. There are many different types of trusts to minimize or avoid these taxes. They include:
Grantor Retained Trusts / (GRAT / GRUT)
Charitable Remainder Trusts / (CRAT / CRUT)
Charitable Lead Trusts / (CLAT / CLUT)
Qualified Personal Residence Trust (QPRT)
Irrevocable Life Insurance Trust (ILIT)
Qualified Domestic Trust (QDOT)
Intentional Grantor Trust (IGT)
Each of these trusts provides different tax saving opportunities. A primary concern with any of these trusts, however, is that they require the grantor (i.e., the person creating the trust) to give up control of the assets placed in the trust. The grantor is also prohibited from making changes to the trust after it is created and basically must give up his rights. While this may seem extreme, people opt to create these trusts to avoid the alternative of having a substantial portion of their estate going to the government in taxes.