Although trusts fall under the umbrella of estate planning, your trust can go into effect during your lifetime. This type is known as a living trust or an inter vivos trust.
You can create your living trust so that you are the beneficiary. This means a trustee will manage the assets and distribute them to you according to the terms of the trust. Your trust can also name successor beneficiaries, so that after you die the trustee manages the assets for the benefit of your family or whoever you named as your successors. In this way, you can preserve property for your family, your friends or your favorite charity after you are gone.
Trusts also give the advantage of allowing property to escape the probate process which can be slow and expensive. Instead, those assets carry on as before, with a trustee managing them and distributing them to your successor beneficiaries.
How much control do you need?
If you decide to open a living trust, your first question is how much control you want over the assets.
With that question in mind, you have two main options: Your trust can be revocable or irrevocable.
When you create a revocable trust, you retain the right to make changes to the trust or even to dissolve it altogether if necessary. Obviously, this gives you a great deal of control over the assets in the trust, but it comes at the cost of some protection. It is easier for you to get to the assets in the trust, but it’s also easier for creditors, including the IRS.
As the name implies, an irrevocable living trust includes language stating that it cannot be revoked or changed. If a trust is irrevocable, no one can access the assets in the trust except the trustee, and the trustee can only do so according to the instructions in the trust. This means you can’t change your mind and draw out the assets if you need them, but it also means that no one else can, including your creditors. That said, the creator of an irrevocable living trust can alter the terms of the trust under certain conditions.