Before you set up a trust, ask yourself what you are trying to accomplish. Here are just a few of the many special uses for trusts:

• A charitable trust is used to make donations and realize tax savings for an estate. Typically, there is a transfer of property such as art or real estate to a trust which continues to hold the asset until it is transferred to the charity, usually after your death. The donor can continue to enjoy the use of the property, then the charitable gift may be deductible for estate tax purposes.
• A bypass trust allows a married couple, in certain cases, to shelter more of their estate from estate taxes. The first spouse to die can leave assets in a trust which can provide income to the surviving spouse for the rest of his or her life, taking advantage of the unified credit provided under Federal Gift and Estate Tax law. Upon the death of the second spouse, the assets in the trust pass directly to the children or other beneficiaries, without being taxed at the second spouse’s death.
• A spendthrift trust can be a good idea if your beneficiary is too young or does not have the mental capacity to handle money. The trust can be established so that the beneficiary receives small amounts of money at specified intervals. It is designed to prevent that person from squandering money or losing the principal in a bad investment.
• A life insurance trust is often used to give your estate liquidity. In this case, the proceeds are payable to the trust and the trustee is empowered to lend money to or purchase assets from the estate.