Revocable Living Trust: One of the most simple and popular trusts is the revocable living trust. The idea behind this type of trust is that you may wish to transfer your property to yourself, or to another highly qualified and trusted person, while you retain all of the rights of ownership during your lifetime. This type of trust typically provides that the property passes to your specified beneficiaries on your death. This means that you are often able to avoid the probate process in your state. Generally, this is the sole purpose for forming a revocable living trust, as there are no significant estate tax planning or gift tax benefits from these types of trusts.

Tax Planning Trusts, Children's Care or Dependent Care Trusts and Other Trusts: Depending upon the purpose you wish to accomplish, you can decide which trust instrument is best to serve this need. For trusts which involve the care of a child or children, or other family members who cannot for one reason or another care for themselves, your most important purpose is to create a trust instrument with the most possible flexibility which will enable you to care for the person in the best manner possible, all while remembering that circumstances and values change over a number of years. Also, these types of trust might be in existence for years and years and great care must be taken to anticipate changes likely in state laws and court cases so that the trust purpose will not be thwarted.

For trusts which are primarily to serve tax purposes or to keep money flowing in the family, the primary purpose requires that you understand complicated income and gift and estate tax laws. Most important, if you decide to explore the creation of this type of trust, you should have at least one expert, an attorney, prepare this document for you and expect to make changes in the trust document and maybe even in the creation of newer trusts, which coincide with the changes made in the Tax Code. These trusts are really beyond the scope of this discussion.

For trusts which are created primarily to serve the purpose of passing property to your heirs while avoiding probate, you should be most concerned about how you intend to avoid probate. As we have discussed in the section on Wills, if you prepare a trust improperly, or there is a defect in the execution of the trust, or property is not properly transferred into the trust, you may end up in probate anyway.

Trusts can serve a number of useful purposes. Should you need to determine whether a trust can serve a specific need, it is best contact member services and be paired with a Plan Attorneys in your legal plan, so that you can devise the best possible means of accomplishing your goals.