(FORTUNE Magazine) – If you think trusts are only for folks with hopelessly arcane finances, or aren't worth the trouble, consider this simple example: $100,000 in growth stocks put in trust for a 10-year-old, in a way that triggers no taxes, could be worth $2.2 million 40 years from now when you die, assuming an 8% annual return. If the stocks stay in your estate and you will them away, Uncle Sam could take half.

If avoiding this tax hit intrigues you, a trust may be worth the effort. There are many different kinds of trusts, but the ones offering tax benefits are known as irrevocable trusts. That means they can't be changed, so be sure you're willing to part with control over the asset--be it a house or an insurance policy. The costs of setting up a trust range widely, from $10,000 for the cadillac version with lots of advisers to as little as $500 for the plain-vanilla variety.

The basics: You and your husband have totaled up the value of your home and your life insurance policy--plus assets like IRAs--arriving at a total of $1.8 million. A husband or a wife can leave everything to a spouse free of estate tax. But the most each can leave other heirs tax-free is $600,000. Your spouse may choose to leave you the entire $1.8 million in his or her will, but that means that when you die, your children could be hit with taxes on $1.8 million minus your exemption of $600,000.

If you and your spouse divvy up the assets in your estate--and set up certain trusts--you can avoid the tax on $1.2 million instead of just $600,000. This is how it works: First, you each set up separate A and B trusts. The A trust, or "marital trust," enables you to hand off an unlimited amount of assets to your spouse in a way that's less vulnerable to legal scrutiny. The B trust, or "bypass trust," is the one that saves you the taxes. When the first spouse dies, assets he has put in his trust go to his family rather than to the surviving spouse. Thus the family gets his $600,000 exemption as well as the one that comes when his spouse dies.

If your primary assets are the family business or real estate, then you may want to consider a life insurance trust. Having assets like these means that heirs may have to sell quickly to meet the tax bill. But if you put the life insurance policy in the trust, it is removed from your estate and your heirs get the proceeds tax-free. And they can use the proceeds to pay the estate taxes on the business.

Another way to save money for the kids? Try a QPRT, or a qualified personal residence trust. Consider a couple in their mid-40s. They want to pass on their $600,000 home to their children, but they don't want to burden them with the estate taxes that a big inheritance would incur. One way around that is to put the home in a QPRT, which freezes the value of the house for tax purposes. That would require the parents to forsake ownership in their home, but the couple might retain the right to live there for 20 years. After that, they must pay rent to their children or move out. The right to occupy the house for those 20 years is equal to $466,000 (based on an IRS formula). Thus, the gift to their children is valued at only $134,000 (the gift tax on that amount could be as much as $73,700). By the time the house passes to their children, it's likely to be worth considerably more, but there will be no additional tax due as long as the parents outlive the trust. If the house had not been put into a trust, and its value had increased to $1 million, the tax could amount to as much as $550,000.

The advantage of a QPRT is clear--it will fix your tax bill well before property appreciates. But the IRS has recently proposed a regulation that eliminates the option of buying back the home before the trust expires. So a QPRT may be better for vacation homes, says Charles Cangro, senior tax manager at Ernst & Young.

Less can be more: If you own stock you want to pass on to your heirs, you can freeze the value of the shares for gift-tax purposes. You can do this and retain an income by setting up a GRAT (grantor retained annuity trust). You put stock, say $1 million worth, in a GRAT that will pay you, say, a $100,000 annuity over 20 years. The IRS determines how much will be left in the trust for your heirs by applying a complex formula that uses a theoretical growth rate for the stock (around 7.6% right now). The resulting gift will be discounted to its value today, and that's what you'll pay tax on. In this example, that final amount is $36,000. But with any luck, the stock will grow at 10% a year, which will leave your heirs with $1 million when the trust ends. One problem: If you don't survive the life of the GRAT, most or all of what's left in the trust when you die goes back into your estate, and the tax benefit of sheltering the assets will be lost. Thus, some people use two-, five-, or ten-year periods.

Charity: Charitable remainder trusts help the local cash-hungry orchestra and are an excellent way to reduce the tax bite on appreciated assets.

Say you have $100,000 worth of stock that has produced double-digit growth over many years. You would like to sell, but don't want the capital gains tax. Solution: Put the stock in a charitable remainder trust. The trust can sell the stock without capital gains tax and reinvest the money. You, and probably your spouse, receive a recurring income from the trust. If you choose, your children can continue to receive that income after your deaths for a set number of years. At the end of the trust (you set the term) the charity gets what's left over. You receive a tax deduction up front that's based on the present value of what the charity is likely to receive.

Offshore trust: If you're worried that a frivolous claim from a patient or a client will wipe out your net worth, consider taking assets offshore. Offshore trusts can't be beat for asset protection from creditors, litigants and divorce settlements. One of the best ways is for the trust to have ownership in a corporation or limited liability company that in turn will invest in active businesses such as an offshore local hotel chain. That income can be reinvested offshore. This two-step arrangement keeps the creditors and the tax man further at bay. But the IRS has been cracking down on abusers with stricter reporting requirements and penalties on deferred income.