The term "living" in a living trust means that the trust is created while the grantor -- or trust creator -- is alive. In the case of many living trusts, the grantor can change or alter the trust and remain in control of the assets within the trust while he or she is still alive. The grantor can do this by making him or herself the trustee.
When the grantor retains control of a trust like this, it's called a "revocable living trust." In other words, the grantor can change the trust beneficiaries and even dismantle the trust if desired. Due to the fact that the trust creator will still be able to control the trust while alive, it means that the assets will still be a part of the estate -- and in some cases, the money could be taxed after death as a part of estate taxes (when the estate is large enough).
An irrevocable living trust cannot be changed. The grantor will permanently give up his or her assets to the trust and for the benefit of the beneficiaries. In the case of a trust like this, the grantor may want to be exceedingly careful to plan the trust in the way that he or she wishes and in a legally sound fashion to protect the trust being deemed invalid by a court at a later time.
For estate planning purposes, grantors can name their living trusts as the beneficiaries of different assets (such as life insurance policies) that will go directly into the trust at the time of death. Those assets will then be put to use for the beneficiaries of the trust. For example, IRAs and 401(k)s could be earmarked to move under the ownership of a living trust after the estate planner dies for the benefit of the planner's spouse.
If you are hoping to create a living trust when planning your estate, don't try to do it by yourself. Our legal team is available to assist you with all of your trust planning needs.