Trusts are an important estate planning tool that often don't get enough explanation, or get just enough explanation to make it even more confusing. When utilized in the proper situation, a trust can save money (whether through tax savings, reduced attorney fees, or reduced estate administration fees), protect assets, assist in benefit qualification, and provide for children, to name just a few.
There are many different types of trusts, and the type utilized by your attorney will depend on your situation and your wishes regarding the maintenance and distribution of your estate. However, the two most basic trust types are the revocable trust (or living trust, as it is also called) and the irrevocable trust. The main difference between these trusts? It’s the ability of the grantor to change the terms and beneficiaries of the trust, and like you’d expect, a revocable trust can have its terms changed by the grantor, while an irrevocable trust cannot. Now, the reasons and uses for each type of trust vary, but generally speaking, a revocable trust is a tool to avoid probate and retain control over the trust assets, and an irrevocable trust is a tool to minimize estate taxes or assist in the protection of assets for government benefit purposes (the irrevocable trust will also help minimize probate expenses and/or retain control over trust assets).