Trusts are entities controlled by documents (trust agreements) that are in the nature of contracts. Trust agreements appoint trustees and describe how the trust will operate. There are many kinds of trusts that are used for many kinds of purposes. Trusts can be revocable (meaning the grantor, the person who forms the trust can amend and revoke it) or irrevocable (meaning it cannot be revoked or amended - although these are not quite absolutes). Trusts used in estate planning can come into existence either upon death - a testamentary trust or during life - a living trust (also known as grantor trust and inter-vivos trust).
- The Testamentary Trust is a trust created upon a person's death and is usually funded by that person's will, in which case the will "pours" property into the trust at death thereby funding the trust. Funding means to put property into the trust.
- The Living Trust (or inter-vivos trust) created during your life as part of your estate plan - primarily for avoiding the probate process and to maintain privacy about your assets. If you form a living trust, you must actually "fund" the trust by transferring your property into the trust so that the trust, rather than you personally, becomes the owner of the trust. Accounts are re-titled into the name of the trust and your real property is transferred by deed into the trust. You must still have a Will because any property that is not transferred into the trust will still pass under the terms of your Will [unless that property passes by right of survivorship or by beneficiary designation, as retirement benefits and insurance typically do and bank accounts that are joint accounts with right of survivorship ("JTROS") do]. Probate is avoided entirely if all your assets are transferred into the trust and it is avoided partially if only a portion of your assets are transferred into the trust. Upon your death, the trust owns the property transferred into it, rather than you owing it personally and thus no probate of the assets in your trust is required.