A trust, like a corporation, is an intangible legal entity (“legal fiction” might be a more accurate term) that is capable of owning property. You can’t see a trust, or touch it, but it does exist. The first step in creating a working trust is to prepare and sign a document called a Declaration of Trust.
Once you create and sign the Declaration of Trust, the trust exists, and you can transfer property to it. The trust becomes the legal owner of the property. There must, however, be a flesh-and-blood person actually in charge of this property; that person is called the trustee. With traditional trusts, the trustee manages the property on the behalf of someone else, called the beneficiary. However, with a living trust, you, the person who creates the trust, can be the trustee and also, in effect, the beneficiary, until you die. Only after your death do the trust beneficiaries you’ve named in the Declaration of Trust have any rights to your trust property.

A trust can seem like a mysterious creature, dreamed up by lawyers and wrapped in legal Jargon. Trusts were an invention of medieval England, used as a method to evade restrictions on ownership and inheritance of land. Don’t let the word “trust” scare you. True, the word can have an impressive, slightly ominous sound. Historically, monopolists used trusts to dominate entire industries (for example, the Standard Oil Trust in the era of Teddy Roosevelt’s “trust-busting”). And trusts have traditionally been used by the very wealthy to preserve their riches from generation to generation. (Indeed, isn’t one version of the American dream to be the beneficiary of your very own trust fund?) But happily, the types of living trusts this book covers aren’t complicated or beyond the reach of ordinary folks. Here are the basics.

Living trusts are an efficient and effective way to transfer property, at your death, to the relatives, friends charities you’ve chosen. Essentially, a living trust performs the same function as a will, with the important difference that property left by a will must go through the probate court process.
In probate, a deceased person’s will is proved valid in court, the person’s debts are paid and, usually after about a year, the remaining property is finally distributed to the beneficiaries. In the vast majority of instances, these probate court proceedings are an utter waste of time and money.
By contrast, property left by a living trust can go promptly and directly to your inheritors. They don’t have to bother with a probate court proceeding. That means they won’t have to spend any of your hard-earned money (at least, I presume it was hard-earned) to pay for court and lawyer fees.
Some paperwork is necessary to establish a probate- avoidance living trust and transfer property to it, but there are no serious drawbacks or risks involved in creating or maintaining the trust, You don’t even need to maintain separate trust tax records. While you live, all transactions that are technically made by your living trust are reported on your personal income tax return.
These trusts are called “living” or sometimes “inter vivos” (Latin for “among the living”) because they’re created while you’re alive. They’re called “revocable” because you can revoke or change them at any time, for any reason, before you die.
While you live, you effectively keep ownership of property that you’ve technically transferred to your living trust. You can do whatever you want to with any trust property, including selling it, spending it or giving it away. Basically, a revocable living trust is merely a piece of paper that becomes operational at your death. At that point, it allows your trust property to be transferred, privately and outside of probate, to the people or organizations you name as beneficiaries of the trust.