Testamentary vs. Living Trusts A testamentary trust becomes effective upon your death and is usually established by your last will and testament. It enables you to control the distribution of your estate, including the opportunity to name a guardian for minor children’s assets, but does not avoid probate. A living trust takes effect during your lifetime. When you set up a living trust, you transfer the title of all the assets you wish to place in the trust from you as an individual to the trust. Technically, you no longer own the transferred assets. If you name yourself as trustee, you maintain full control of the assets and can buy, sell, or give them away as you see fit. However, this option may negate any estate tax benefits. Revocable vs. Irrevocable Trusts Living trusts can be revocable or irrevocable. A revocable trust can be dissolved or amended at any time while the grantor is still alive. An irrevocable trust, on the other hand, is extremely difficult to modify or revoke, subject to state law. By definition, testamentary trusts are always irrevocable.
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