A trust is a legal document used in estate planning to describe how you would like your property managed and distributed upon your death. You may establish one or more trustees to manage the trust and choose beneficiaries of the property in the trust. A trust may be revocable or irrevocable.

A revocable trust allows the one who started the trust (the settlor or grantor) to alter or cancel the trust at any time during his or her lifetime. This type of trust is also referred to as a “revocable living trust” or “living trust.” Any income from the assets of a revocable trust is passed to the settlor. When the settlor dies, a revocable trust usually becomes an irrevocable trust. An irrevocable trust may not be changed or revoked without permission of the beneficiary. The settlor gives up ownership in and control of any property given to an irrevocable trust. The trust is then taxed on any income from its assets.

An irrevocable trust is often created for tax purposes and asset protection. A person may transfer property into an irrevocable trust and no longer be taxed personally on any income from that property. Since the assets are no longer part of the person’s estate, any appreciation will not be subject to his or her estate tax upon death. The assets of an irrevocable trust are protected from the creditors of those who contributed to the trust.

Irrevocable trusts may be created to manage charitable donations. For example, an irrevocable charitable remainder trust may provide its beneficiaries with income during their lifetime, with the rest going to charity upon their death. There are a number of potential tax benefits to creating charitable trusts. Consult your tax and legal professionals about trusts that may be beneficial for your estate.

Another advantage to creating a trust is avoiding probate, an often lengthy and costly process. A trustee may distribute assets confidentially to beneficiaries quickly, saving time and money for the beneficiaries. For more information, see this article at MSN Money: moneycentral.msn.com/quickref/quickref.asp?cat=10&qamode=2&reftype=0&selcat=6&sub=0&topic=8