Split interest trusts are established to provide income to one set of beneficiaries for a set time, then pay out to another set of beneficiaries. For example, charitable remainder trusts are designed to provide benefits to named individuals, such as the settlor’s family, for a specified period of time, with the remainder interest passing to charity. The objectives of this type of trust include: removing the transferred assets from the settlor’s estate for estate tax purposes, and receiving a charitable deduction on the settlor’s income tax return.
Another class of split interest irrevocable trusts, known as grantor retained income trusts, is designed to minimize taxes by incurring a gift tax only for the remainder interest which follows a settlor’s retained interest. If this sounds obtuse, you can read more about GRITs.