This website describes many common trust arrangements, but there is no limit to the types of trusts we can create. Here are a few exotic trusts that people use.
Grantor Retained Annuity Trusts (GRATs)
A Grantor Retained Annuity Trust is a vehicle for transferring large amounts of wealth during life, thereby reducing the Grantor's taxable estate. It is done by leveraging investment returns against low federally determined interest rates. If the GRAT's investments beat the interest rates, then the difference can pass to the beneficiaries free of gift or estate taxes.
Charitable Remainder Trusts (CRTs, CRATs, CRUTs, NIMCRUTs)
A transfer to a Charitable Remainder Trust is a split interest gift, where the Grantor retains in income stream from the Trust, and the remainder passes to a charitable beneficiary. Because the remainder passes to a charity, the present value of the remainder interest is allowed as a charitable deduction from income taxes, and the amount in the trust is not subject to gift or estate taxes, because of the charitable remainder.
Intentionally Defective Grantor Trusts (IDGTs)
An Intentionally Defective Grantor Trust is designed to remove assets from the Grantor's taxable estate, but still have trust income taxed to the Grantor individually. Because the income is taxed to the Grantor, it is said that the trust is defective. However, in certain circumstances this defect is advantageous, because the Grantor's payment of the trust's tax liability is effectively an additional gift-tax-free transfer to the beneficiaries. This arrangement is often utilized for installment sales of family businesses, or sophisticated gifting schemes.
Qualified Personal Residence Trusts (QPRTs)
A Qualified Personal Residence Trust is designed to remove the Grantor's personal residence from their taxable estate, and use a portion of their lifetime gift tax exemption that is less than the home's fair market value. To do this, certain requirements must be met.