The Living Trust
There are two types of living trusts: revocable and irrevocable.
A revocable living trust can be revoked by the grantor (creator) of the trust at any time in whole or in part. One establishes a revocable living trust to avoid probate and the ensuing costs of attorney and court fees. Such a revocable trust may avoid additional probate procedures when the grantor owns property in more than one state. A revocable living trust is useful as a management tool in the event that the grantor becomes incapacitated. It may then help preclude the expense and effort of establishing a guardianship.
Revocable trusts may not be necessary if the estate is small because probate costs will be low. Revocable living trusts are also not necessary if the individual's estate substantially consists of non-probate assets such as jointly held property, Individual Retirement Accounts (IRAs), Tax Deferred Annuities (TDAs), etc.
Note: Revocable living trusts generally are not devices for reducing income, estate or gift taxes, nor will they help in protecting assets for the purpose of qualifying for Medicaid and other such programs with limits on the resources and income of the recipient.
An irrevocable living trust cannot be revoked by the grantor, and the grantor cannot be the trustee. The trust not only avoids probate but is a vehicle for protecting assets while qualifying for Medicaid coverage for nursing homes and home care, adult day care services etc. An irrevocable living trust is also used for establishing a trust for a child, grandchild or other persons.