Anyone who creates a trust is known as a grantor, or alternately, a settlor. When grantors create living trusts they do so while they are still alive, as opposed to creating the trust through the terms of their Wills. Living trusts are very popular because the grantor maintains the right to change the terms of the trust, making it a revocable trust. Once that grantor dies those terms then become permanent and the trust becomes an irrevocable trust. Living trusts can be used both to hold assets for the grantor and distribute them according to specific terms, but are also useful for other purposes, such as protecting against incapacity, allowing for privacy, and allowing for quick access to property once transferred to the beneficiaries.
Any trust you create through your last Will and testament is known as a testamentary trust. These trusts become effective only after you die and are useful for a variety of purposes, such as ensuring that a beneficiary with special needs is properly cared for, preserving inheritances in blended family situations, or by providing for a spouse’s lifetime income. You can change the terms of a testamentary trust as long as you remain mentally capable, though these trusts are often not as useful as living trusts in some situations.
All trusts can be differentiated by whether they are living or testamentary trusts, but there are numerous specific types of trusts available to you. These trusts can be used to protect life insurance proceeds, ensure a minimal tax exposure, and perform other specific tasks depending on the needs of the person creating them.