Estate planning arranges for the transfer of an individual’s property after death and may involve a will and/or trust, or the application of state intestacy laws.

An estate consists of all property owned at death before it is distributed by will, trust, or intestacy laws. An estate may contain both real property (real estate, including houses and investment properties) and personal property (all other property, including bank accounts, securities, jewelry, and automobiles).

A trust is a legal agreement that names someone to hold property for the benefit of others. The trustee is the person or company that manages trust property, and “beneficiaries” are the people who benefit from the trust. A living trust—the most common type of trust—is a trust created while the property owner is alive, and it’s revocable during the lifetime of the trust maker. Some people use a will in addition to a trust to distribute their property.

The main advantage to using a trust is that a trust helps to avoid probate. Probate is the court process that oversees the transfer of your property and payment of any debts after you die. The process can be expensive and time-consuming for your loved ones. There are some other advantages to a trust as well. They include:
Privacy. A will becomes public after the property owner dies, but a trust stays private. Only the beneficiaries and the trustee are informed of the trust and its contents.
Flexibility. A trust can be more flexible than a will, which can be especially useful to those who have complicated relationships or estate planning needs. For example, a husband in a second marriage might want his current wife to be able to live in their house before the house passes to his children from his first marriage.
Timed distributions. A trust doesn’t have to transfer all the property at once, and can instead transfer property over time. A parent could set up a trust to take care of the bills of an adult child with special needs rather than giving their child a lump payment. Similarly, parents of young children or young adults may want to provide payments monthly or yearly until the children become mature enough to handle their own money. Tax avoidance. Some trusts can be designed to reduce estate taxes. However, most estate taxes affect only the very rich.

A revocable trust is one that can be modified or revoked at any time. A simple living trust is a revocable trust that becomes irrevocable when the trust maker dies. In contrast, an irrevocable trust cannot be changed once it has been made. Trusts that are made to avoid estate taxes are typically irrevocable trusts.