Trusts fall into two basic categories: “Revocable,” meaning you can change or terminate them at any time, and “Irrevocable,” meaning once you transfer property into the Trust it stays there, and there can be little or no changes (with a few exceptions).
The main reasons people create Trusts are to avoid Probate (this is especially helpful if you own real estate in one state, but live in another state), to transfer property to family, charities or other persons, or even for privacy.
You can create a Trust either during your lifetime (“Living Trust”) or by Will (“Testamentary Trust”). You can transfer real or personal property, or both, into a Trust.
Trusts are governed by state Law and the taxable consequences are governed by both Federal and State laws.
“Special Needs” Trusts are frequently used to protect a person under a physical and/or psychological disability. These Trusts may be eligible for special State and Federal tax benefits as well as for certain Medicaid benefits, and may preserve assets for your family.
Asset protection is another possible use for a Trust.