So-called “living trusts,” created while you’re alive, are increasingly popular. The term typically refers to revocable trusts, because they can be canceled if the creator changes his or her mind. You usually can be the trustee and beneficiary of your revocable trust, so you can keep control of assets moved into the trust.
Many people use revocable trusts because trust assets avoid the time and expense of probate. What’s more, they provide incapacity protection as well. The successor trustee you name for your revocable trust can take over management of the trust assets and provide for your care if you become unable to handle your own affairs. However, there are drawbacks, too:
Cost: There will be expenses involved in creating any type of trust.
Effort. You must take the time to retitle assets so they’re held by the trust, if you want the benefits to be realized.
Exclusions: Certain assets, such as retirement accounts, cannot be transferred to a trust without adverse consequences such as tax acceleration.
Taxes. There are no tax advantages to moving assets into a revocable trust. To save income or estate tax, you must use an irrevocable trust and relinquish some control over the trust assets.