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Trusts can be grouped in to the following categories:
- Living trusts - established while you are still alive
- Testamentary trusts – established by the terms of your will
Living Trusts can be:
- Revocable – meaning that the trust creator can decide to revoke the trust, or a portion of the trust, and resume ownership of the assets
- Irrevocable – meaning that the trust creator has permanently given up ownership and most or all control of any assets placed in the trust
See Revocable v Irrevocable Trusts below.
There are a variety of reasons to set up a trust. In some cases you may even want to do so many years before you might expect to die. People often ask, “When should I consider a trust?” Here are some of the reasons for setting up a trust:
- Avoiding probate - This is a common reason for establishing a living trust
- Asset Management - Having a particular individual or a professional asset manager manages all of your assets; may apply to all kinds of trusts.
- Timed Disposition of Assets - Controlling the timing of disposition of your assets to your heirs; may apply to all kinds of trusts
- Privacy - Keeping your affairs away from public scrutiny. Trusts usually do not become public documents, while wills do, although the pour-over will that should accompany every living trust does require probate, and may cause the living will to become a part of the public record; may apply to living trusts
- Appropriate Disposition - Being certain that both the trust grantor, and later, the grantor’s heirs are cared for as their needs arise; may apply to all kinds of trusts.
- Asset Protection - Insulating your estate from the claims of creditors (depending on your state’s laws the trust may need to be irrevocable for such protection); may apply to living trusts
- Fairness and Clarity - Being certain that you dispose of or distribute assets effectively while you are still of a clear mind; may apply to all kinds of...