There are basically two kinds of trusts:
* Living trusts. These are trusts you establish during your lifetime.
* “Testamentary" trusts. These trusts go into effect at your death. Such a trust may be created via a will or through language in a living trust.
Many living trusts are revocable. That is, they can be changed or canceled while you’re alive. You also can create a permanent (“irrevocable”) trust while you’re alive.
If a revocable trust is to continue past your death, it will then become irrevocable. A testamentary trust must be irrevocable.
Different types of trusts have different benefits.
Revocable trusts allow you to keep control of trust assets and collect trust income. The main benefits are protection from possible incapacity and probate avoidance.
Irrevocable trusts offer the same incapacity and probate protection in addition to possible tax savings and creditor protection. However, you often must relinquish control of the assets transferred to an irrevocable trust and such transfers may trigger gift tax.