There are two types of common trusts, testamentary and lifetime trusts. A testamentary trust springs into existence when someone dies. These trusts are embedded in a will or another trust and are often used to protect assets or save taxes. A lifetime trust is called a “living” or “revocable” trust. It is most often used as a specialty trust for gifting, life insurance policies, etc. This type of trust separates legal title form beneficial interest in the property. Such trust is usually funded during creators lifetime with the creator’s assets managed usually by the creator with the creator being the lifetime beneficiary. The living trust also usually says who gets trust assets at death of creator, so in a way it works like a will, but assets do not go through probate. A living trust is a lot of things but it is
- Not a way to save estate taxes;
- Not a way to preserve assets from your creditors;
- Not a way to avoid assets going to pay for nursing home care; and
- Not a way to save legal costs.
Living trusts can be used if you own out of state property. They can also be used to help prevent commingling of separate and community assets, if properly drafted. Living Trusts can provide management upon disability, but a well drafted power of attorney can do the same thing.