# Types of Trusts: Discretionary, Fixed, Revocable, Life Interest > Discretionary, fixed, revocable and irrevocable, life interest and purpose trusts—how trust types differ and which to choose for inheritance, asset protection and charity. Author: Мария Плотникова — юрист, Family Office (https://wiki.private.law/authors/plotnikova) Last modified: 2026-07-05T08:37:00.000Z Canonical: https://wiki.private.law/en/trust-types Topics: structures Jurisdictions: global Semantic tags: company --- ## Concept > 🔗 **Related** > [How a Trust Works](https://wiki.private.law/en/trust-basics) The word “trust” covers a whole family of structures. They share one mechanism: a settlor transfers assets to a trustee, who holds them for the benefit of others. They differ in who controls distributions, how firmly the assets are walled off from creditors, and how they are taxed. For the shared mechanics, see How a Trust Works. The type you choose decides everything else, and the wrong type delivers the wrong protection and an unexpected tax bill. Trusts grew out of English equity. Medieval landowners leaving on crusade conveyed their land to a friend to hold to the use of the family, and the Court of Chancery enforced that obligation of conscience when the common law would not. For centuries there was essentially one trust. The catalogue of named types came later, assembled by tax statutes, by asset-protection legislation in offshore jurisdictions, and by estate-planning practice, each carving out a variant with its own rules. The labels overlap in practice, and a single trust can be discretionary, irrevocable and dynastic at the same time. > 🍓 The main axes of choice are discretionary vs. fixed (who decides on distributions) and revocable vs. irrevocable (whether the settlor can take the assets back). Both protection and taxation depend on these choices. ## Discretionary and Fixed > 🔗 **Related** > [Trusts and Inheritance Tax](https://wiki.private.law/en/trusts-inheritance-tax) In a discretionary trust the trustee decides which members of a defined class receive distributions, and how much. No beneficiary owns a fixed share, only a hope of being considered, which is what makes the structure flexible and hard for a beneficiary’s creditors or a divorcing spouse to attack. In a fixed or bare trust the shares are written into the deed, and a named beneficiary is absolutely entitled to a stated portion. That is simpler and more transparent, and correspondingly more exposed, because a defined entitlement is itself an asset a creditor can reach. Because the class can be drawn widely and the discretion is real, a letter of wishes usually sits beside the deed to guide, without binding, how the trustee exercises it. That flexibility carries a tax price. In the UK most discretionary trusts fall inside the [relevant property regime](https://www.gov.uk/trusts-taxes): assets settled above the nil-rate band attract a 20% lifetime entry charge, a periodic charge of up to 6% falls due on each ten-year anniversary, and exit charges arise when capital leaves. Other systems reach the same trust differently, which is why the analysis is run jurisdiction by jurisdiction. See Trusts and Inheritance Tax for the UK detail. ## Revocable and Irrevocable > 🔗 **Related** > [protector](https://wiki.private.law/en/trustee-protector) A revocable trust can be amended or wound up by the settlor at any time. That is convenient, and in the United States a revocable living trust is the standard way to keep an estate out of probate. It buys no creditor protection and usually no tax saving, because for most purposes the assets are still treated as the settlor’s. An irrevocable trust is a genuine transfer: the settlor gives up control, and only then do the assets sit outside the estate for protection and succession. Most planning that actually shields wealth runs through an irrevocable, discretionary trust. In practice the boundary is a spectrum. A settlor reluctant to let go can reserve certain powers, or route decisions through a protector whose consent the trustee needs. The more control the settlor keeps, the readier a court or tax authority is to treat the trust as a façade and look straight through it, at which point the protection evaporates. This is the central trade-off of the subject: control and protection pull in opposite directions, and every trust settles on a chosen point between them. ## Special Types ### Life Interest Trust One beneficiary, the life tenant and often a surviving spouse, takes the income or the right to occupy the property for life; on their death the capital passes to the remaindermen, usually children from an earlier marriage. Lawyers call this an interest in possession. It is the classic answer for blended families, because the second spouse is provided for yet cannot redirect the capital away from the first family. For UK inheritance tax a qualifying interest in possession is treated as part of the life tenant’s own estate, so the structure shifts the timing of the charge rather than removing it. ### Purpose Trust > 🔗 **Related** > [Private Trust Company](https://wiki.private.law/en/ptc) A purpose trust exists to carry out a defined purpose instead of benefiting named people. With no beneficiaries to hold the trustee to account, the law requires an enforcer in that role. The commercial version holds the shares of a Private Trust Company or a family holding company, so that ownership rests nowhere personal; charitable and orphan structures use the same idea. Two offshore statutes turned purpose trusts into a mainstream tool. The Cayman Islands’ Special Trusts (Alternative Regime) Law, known as STAR, came into force in 1997 and allows a trust for persons, purposes, or both, always with an enforcer appointed to police it. The British Virgin Islands’ Virgin Islands Special Trusts Act, or VISTA, enacted in 2003, lets a trust hold shares in a BVI company on terms that stop the trustee interfering in how the business is run, curing the old problem of trustees forced to sell a family company in the name of diversification. Both are now standard for holding operating businesses and PTCs. ### Spendthrift and Dynasty Trusts > 🔗 **Related** > [Asset Protection Trusts](https://wiki.private.law/en/asset-protection-trusts) A spendthrift trust stops a beneficiary assigning or borrowing against their interest, which also keeps that interest beyond the reach of the beneficiary’s own creditors until money is actually paid out. A dynasty, or perpetual, trust stretches the time axis instead: it is built to run for many generations and shelter successive transfers from estate and gift tax. Both turn on local law. The old rule against perpetuities once capped a trust’s life at roughly a lifetime plus twenty-one years, but since the mid-1990s a line of US states, among them South Dakota, Alaska, Nevada, Delaware and Wyoming, have abolished or hollowed out that rule to win trust business, so a perpetual dynasty trust is now possible across much of the country. For the offshore creditor-protection variant, see Asset Protection Trusts. > ⚙️ The type of trust is chosen based on the objective and the tax residence of the beneficiaries; the same trust is taxed differently in different countries. ## Recognition and Taxation Across Borders > 🔗 **Related** > [Hague Convention on the Law Applicable to ](https://wiki.private.law/en/trust-recognition-hague) · [forced-heirship](https://wiki.private.law/en/forced-heirship) · [Trusts and CFC](https://wiki.private.law/en/trust-taxation-russia-cfc) A trust is a creature of common law, and civil-law countries historically had no native equivalent. The Hague Convention on the Law Applicable to Trusts and on their Recognition, concluded in 1985 and in force since 1992, bridges the gap: a signatory state can recognise a trust governed by a foreign law and give effect to the split between legal and beneficial ownership. The United Kingdom, Italy, Switzerland, the Netherlands, Luxembourg, Monaco and Liechtenstein are among those bound by it, while the United States signed in 1988 and never ratified. Recognition is uneven, and forced-heirship rules in a beneficiary’s home country can still override the settlor’s wishes. Recognition answers only half the question; tax residence answers the other. The same trust is taxed by reference to where the settlor and beneficiaries live, not where it is administered. A discretionary trust that is harmless in one country can be a CFC, a grantor trust, or a reportable foreign trust in another, dragging look-through taxation and disclosure with it. This is why the type is always chosen together with a tax map of the family. For the Russian beneficiary analysis, see Trusts and CFC. > 💡 Choose the structure for the goal, then stress-test it against two outside constraints: the forced-heirship rules of every country where a beneficiary lives, and the way each of those countries will tax the very same trust. ## How to Choose > 🔗 **Related** > [How a Trust Works](https://wiki.private.law/en/trust-basics) · [Asset Protection Trusts](https://wiki.private.law/en/asset-protection-trusts) · [Trustee and Protector](https://wiki.private.law/en/trustee-protector) · [Trusts and Inheritance Tax](https://wiki.private.law/en/trusts-inheritance-tax) · [Recognition of Foreign Trusts](https://wiki.private.law/en/trust-recognition-hague) · [Private Trust Company](https://wiki.private.law/en/ptc) · [Trusts and CFC](https://wiki.private.law/en/trust-taxation-russia-cfc) · [Private Foundations](https://wiki.private.law/en/private-foundations) · [Forced Heirship](https://wiki.private.law/en/forced-heirship) > 🔗 **Related** > How a Trust Works · Asset Protection Trusts · Trustee and Protector · Trusts and Inheritance Tax · Recognition of Foreign Trusts · Private Trust Company For asset protection and inheritance—irrevocable discretionary; for a surviving spouse—life interest; for holding a structure—purpose trust. The choice is always cross-checked against forced heirship rules and tax implications. This material is for informational purposes only and does not constitute individual legal advice. --- --- ## Factual claims - A trust is a creature of common law, and civil-law countries historically had no native equivalent.