Beyond the two broad trust categories, there are a number of different specialty trusts you can incorporate into your estate plan. The type of trust that's appropriate depends largely on what you need the trust to do. Marital Trusts A marital trust can be established by one spouse for the benefit of the other. When the first spouse passes away, assets in the trust, along with any income the assets generate, are passed on to the surviving spouse. A marital trust would allow the surviving spouse to avoid paying estate taxes on those assets during their lifetime. The surviving spouse's heirs, however, would be responsible for paying estate tax on any remaining trust assets that are eventually passed on to them. Bypass Trusts or Spousal Lifetime Access Trusts Married couples may also establish a bypass (credit shelter) or spousal lifetime access trust to reduce the estate tax impact for their heirs. These are types of irrevocable trust that transfers assets directly from one spouse to another at the time of the first spouse's death. The surviving spouse, however, doesn't hold the assets directly. The trustee manages them instead, which allows those assets to be excluded from the spouse's estate. When the surviving spouse dies, any remaining assets goes to their beneficiaries, free of estate tax. Charitable Trusts A charitable trust helps you to create a legacy of giving within your estate plan. There are two types of charitable trusts you can establish: a charitable lead trust and a charitable remainder trust. A charitable lead trust allows you to earmark certain assets for a specific charity or charities, with the rest of your assets going to your beneficiaries when you pass away. A charitable remainder trust allows you to receive income from your assets for a set period of time, with any remaining assets or income going to a charity that you designate. Generation-Skipping Trust If you'd rather transfer assets to your grandchildren than your children, you can choose a generation-skipping trust. This type of trust lets you pass assets to your grandchildren, allowing your children to avoid paying estate taxes on those assets in the process. At the same time, you still have the option to allow your children access to any income that the assets generate. Life Insurance Trust A life insurance trust is an irrevocable trust that you designate specifically to hold life insurance proceeds. You designate the trust as the beneficiary of your life insurance policy; when you die, the policy proceeds are paid into the trust. The trustee then manages the proceeds on behalf of your beneficiaries. The advantage of an irrevocable life insurance trust is that it allows you to avoid estate taxes on life insurance payouts. Special Needs Trust A special needs trust is designed to help financially provide for a special needs dependent — such as a child, sibling or parent — without compromising their ability to receive government benefits based on their disability. The money in the trust allows them to pay for medical care or day-to-day needs while also allowing them to remain eligible for government benefits. Spendthrift Trust A spendthrift trust may give you peace of mind if you're concerned about your heirs frittering away their inheritance. This type of trust allows you to specify when and how principal trust assets can be accessed by the trust beneficiaries, which prevents them from being misused. For instance, you may restrict beneficiaries to only benefiting from the income or interest earned by trust assets, but not the principal amount of the assets themselves. Testamentary Trust A testamentary trust, or will trust, is established through a last will and testament. Once you pass away, the trust becomes irrevocable. The main function of a testamentary trust is to ensure that beneficiaries can only access trust assets at a predetermined time.