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.
