A family trust can offer greater control over how assets are distributed after someone passes. In the evolving landscape of wealth management and estate planning, many families explore strategies to protect assets, manage tax exposure, and avoid probate. Trusts are often used as part of a broader estate plan to support long-term family planning objectives.
Current estate and gift tax exemptions are scheduled to decrease significantly after December 31, 2025. Families with substantial assets may wish to review their estate plans in light of these potential changes. Tools such as irrevocable and generation-skipping trusts are commonly used to help align planning strategies with the existing exemption limits.
What is a Family Trust?
A family trust is a legal entity that holds and manages assets on behalf of beneficiaries, such as children, grandchildren, or other loved ones. You, the grantor, set the terms, and a trustee you appoint oversees the assets according to those instructions.
- Revocable (Living) Trusts: let you retain control and make changes during your lifetime.
- Irrevocable Trusts: cannot be altered once established but deliver powerful tax savings and asset-protection benefits.
In safeguarding your legacy, both types of family trust offer many advantages that make it a key component of a comprehensive estate plan.
Here are several ways a family trust can support a well-structured estate plan.
Asset Protection—With Limits: A family trust may offer a layer of protection by separating certain assets from an individual’s personal estate. In the case of an irrevocable trust, this separation can help reduce exposure to certain liabilities, such as lawsuits or divorce settlements. While this structure is commonly used by families with substantial assets, it’s important to understand that protections are not absolute.
Important Note: Assets in an irrevocable trust are generally not considered part of the grantor’s estate and may be protected from creditors. However, if transfers are deemed fraudulent or intended to hinder creditors, courts may allow those assets to be reclaimed. Working with legal and financial professionals can help align trust strategies with current laws and individual circumstances.
Avoiding Probate: A family trust is often used to help facilitate the transfer of assets outside of the probate process. Unlike a will, which typically requires court oversight, assets held in a properly funded trust are generally distributed privately and without probate. Avoiding probate may help reduce administrative burdens and maintain privacy for the family, though individual circumstances and state laws can impact the process.
Control Over Asset Distribution: A family trust can provide flexibility in outlining how assets are managed and distributed over time. This structure may be useful for families who wish to include specific provisions for younger beneficiaries or those who might benefit from staggered distributions. By customizing the terms of a trust, families can align their estate plans with personal values and long-term intentions.
Through a family trust, you can:
- Set conditions for asset distribution such as requiring heirs to reach a certain age, complete education, or achieving specific milestones.
- Protect beneficiaries from overspending or financial mismanagement.
- Ensure assets are used for intended purposes, such as education, healthcare, or charitable endeavors.
Tax Advantages: While tax laws are subject to change, certain types of trusts are commonly used in estate planning strategies to help manage estate, gift, or income tax exposure. These potential tax efficiencies depend on the structure of the trust and the individual’s specific financial situation.
For example:
- Irrevocable trusts can remove appreciating assets from your taxable estate, reducing overall estate tax liability.
- Generation-skipping trusts allow assets to pass to grandchildren or subsequent generations, avoiding double taxation at each generational level.
Planning for Incapacity: Another potential benefit of a family trust is its role in incapacity planning. Unlike a will, which only takes effect upon death, a trust can allow for the management of assets during the grantor’s lifetime. If the grantor becomes unable to manage their own affairs due to illness or injury, a successor trustee may assume responsibility for overseeing trust assets according to the terms outlined in the trust document. This structure is often used to support continuity in financial management during periods of incapacity.
Properly structuring a family trust with the support of a qualified financial advisor and estate planning attorney can help align the trust with current tax laws and identify potential planning opportunities.
Key Changes in Estate and GST Exemptions
Irrevocable trusts can remove appreciating assets from your estate, with current exemption levels allowing up to $13.99 million per person. This can significantly reduce estate tax liability. Similarly, generation-skipping trusts enable assets to pass directly to grandchildren without incurring estate taxes at each generational level, taking advantage of the current $13.99 million GST exemption.
These elevated exemption amounts were originally set to expire on December 31, 2025, potentially reverting to approximately $6–$7 million in 2026 unless new legislation was enacted. Many families considered accelerating trust funding or gifting strategies before year-end 2025 to take advantage of the higher thresholds.
That uncertainty was resolved in July 2025, when Congress passed the One Big Beautiful Bill (OBBB). The legislation permanently sets the estate, gift, and GST tax exemptions at $15 million per person beginning January 1, 2026, with future inflation adjustments. This change provides a more stable framework for long-term planning and wealth transfer strategies.
Would a Family Trust be Right for You?
While a family trust can offer many potential benefits, establishing one requires thoughtful consideration of your goals, financial circumstances, and family dynamics. It’s important to work with experienced professionals, including estate planning attorneys and financial advisors, to determine whether a trust aligns with your broader estate planning strategy.
At Moran Wealth Management®, we help individuals and families navigate the complexities of trust planning as part of a comprehensive financial strategy. To learn more about our approach to estate planning, contact one of our advisors to start the conversation.
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