A living trust can be designed to serve almost any purpose, but it must meet certain legal requirements that can vary a little from state to state. You can have an online legal document provider create your trust, or enlist the services of a lawyer to draft your formation documents to meet your state's rules; however, many of the same considerations apply no matter where you live.
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Parties to a Trust
A legal living trust must involve at least three parties -- the person who creates it, someone who benefits from it, and another individual who manages the assets in it. More than one person can fill each category -- and if you form a revocable trust, one person can serve in all three capacities. The person who creates the trust is typically called the settlor or grantor. An individual who benefits from the trust is a beneficiary, and the person who manages the assets in the trust is called a trustee. You can be the settlor of a revocable trust, act as the trustee as well -- and you can even be a beneficiary. You should name at last one additional party if you're the trustee -- a successor trustee or trustees to take over for you when you die or if you should become incapacitated. You can have other beneficiaries in addition to yourself; these individuals typically inherit from your trust after your death. If you form an irrevocable trust, you generally would not act as trustee. You would form it, fund it, and then step aside.
Funding a Trust
A trust can exist as a legal entity without actually holding any property, but normally, you would go through the steps of funding it after you create it. Transferring your property into its ownership involves creating deeds to move real estate into the name of the trust, as well as bills of sale to transfer items of personal property. If you create a revocable trust, you can retain control and management of these assets if you act as trustee. If you create an irrevocable trust, you relinquish control, management and ownership. If you decide not to fund the trust during your lifetime, you can create a pour-over will to transfer your assets into it at your death. Even though it remains empty during your lifetime, it's still legally a living trust because you created it while you were alive. This is different from a testamentary trust, which your executor creates after your death according to the terms of your will.
Duty to Inform Beneficiaries
You don't have to notify your beneficiaries of your revocable trust's existence during your lifetime. Your successor trustee will let them know that you created it -- and that they stand to inherit -- after your death. An irrevocable trust operates by different rules. Beneficiaries are usually entitled to ongoing reports and accountings, both before your death and afterwards.
Duration of a Trust
Your trust can exist indefinitely if this is what you prefer. You can set up a revocable trust to form irrevocable trusts at your death if you don't want your assets to go to your beneficiaries right away. For example, if one or more of your beneficiaries are minors, you might want your trustee to hold onto their property and manage it for them until they reach the age of majority, or some other age you specify in your trust documents. You might do the same thing for an adult beneficiary who is a spendthrift, so she can't whip through her entire inheritance within a short period of time. During your lifetime, you can terminate your revocable trust any time you choose, but you typically can't do this with an irrevocable trust. Because of this, an irrevocable trust is usually most beneficial if you have a very large estate and you're concerned about estate taxes. Giving your property into its ownership removes it from your estate for tax purposes.