Two steps occur in the creation of any trust. The first step is to prepare and execute the trust and various estate planning documents that will fulfill your wishes. The second step involves transferring your assets into the trust.

Once your assets are put into the trust, they are held by the trust and subject to its instructions. The named trustee has control over carrying out those instructions for the benefit of the beneficiaries. The two basic categories of trusts are revocable (can be changed or terminated) or irrevocable (cannot be changed or terminated).

Various types of trusts can be established for different purposes. Examples include:

• Revocable living trust – Also called “inter vivos,” this type of trust is created during your lifetime, and is changeable as your circumstances or desires change. Additionally, assets in this trust can avoid probate.
• Charitable trust – This is a set of assets a donor designates for use by a charitable foundation. Creating a charitable trust is a great way to obtain tax breaks.
• Special needs trust – Otherwise known as a “supplemental needs trust,” this type of trust allows a disabled beneficiary to use assets in the trust without losing their government benefits.
• Tax bypass trust – Also known as a “credit shelter trust,” this trust allows you to pass assets to your beneficiaries without those assets being subjected to estate taxes.
• Totten trusts – Otherwise called a “Payable on Death” or POD account, this involves putting money in a bank account with specific instructions to pass to a named person or persons upon your passing.
• Pet trusts – This is a new type of trust that has been becoming more popular over the last few years. It allows you to set aside money to provide care for a pet or pets after your death.

Trusts have numerous advantages, including keeping your private affairs out of the public forum of a probate court, reducing estate taxes, giving you access to and allowing you to manage your estate, and providing protection from creditors.