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A trust is a legal entity that is capable of owning property and other assets.  A trust is created by an agreement that names a "trustee" to manage the assets and gives detailed instructions for how the assets will be managed and distributed.  The maker of the trust is called the "grantor", and the person for whom the assets are managed and distributed is called the "beneficiary".  A trust controls only that property affirmatively transferred (or "funded") to it.  A trust can be revocable or irrevocable, depending upon the purposes for which the trust is created.


The term "revocable trust" can be used interchangeably with revocable living trust, living trust, or inter vivos trust.  A revocable trust is created while you are living, and because it is revocable, you are able to make changes to the trust instrument when you want, and you may reclaim title to the trust assets at any time.  A revocable trust is used primarily as a will substitute to avoid probate at death, to avoid a court-appointed conservatorship during life, and to maintain privacy that will otherwise be lost with probate or a court-appointed conservatorship.  The goal with a revocable trust used in this manner is to have all assets either owned by the trust during life or directed to the trust at death through beneficiary designations.  This is very important so that your estate plan is not thwarted by assets passing via form of ownership (joint tenancy with rights of survivorship) or contract terms (beneficiary designations for retirement assets and life insurance), which override the terms of a revocable trust.  A revocable trust does not provide asset protection for the trust maker.


An irrevocable trust, as the name implies, is not revocable by the trust maker.  A common type of irrevocable trust is one designed to own life insurance on the trust maker.  Under the laws of may states, creditors can access the cash value of life insurance.  But even if state law protects the cash value from creditors, at death, the proceeds of life insurance owned by an individual on his or her own life is included in the individual's gross estate for estate tax purposes.  Both of these results can be avoided by having an irrevocable trust own the insurance policy and also be its beneficiary.  The dispositive provisions of this irrevocable trust typically mirror the provisions of an individual's revocable trust or will.

See also Special Needs Trusts, Domestic Asset Protection Trusts, Medicaid Asset Protection Trusts, VA Asset Protection Trusts, Charitable Remainder Trusts, and Charitable Lead Trusts.