Setting up a trust is one of the most common ways to transfer assets to family members, charitable organizations, and other parties. It's important, however, to understand what the different types of trusts are and how they can be used. Here is what a trust attorney would likely tell you about these issues.

Revocable vs. Irrevocable Trusts

One of the most basic questions about a trust is whether it can be changed. The terms of the trust are often referred to as being either revocable or irrevocable. In other words, can the conditions of the trust change.

Many people set up revocable trusts to maintain control of the assets within. This can be helpful if there are concerns about the conduct of a younger beneficiary, for example. It also makes it possible to move assets into and out of the trust, providing greater financial flexibility.

Living Trusts

Another factor is when does a trust kick in. It's normal for a client and trust lawyer to configure the terms to not activate until after the client has passed.

The main advantage of a living trust is that beneficiaries get to benefit from it while the grantor is still around. A living trust can also be useful when trying to help someone who has medical issues or mental capacity limitations. Putting a living trust in place may be useful in the estate transfer process, too, because it makes it easier to move assets from an estate into the trust.

Conversely, avoiding a living trust leaves assets in the grantor's direct control. This makes it much easier to utilize or even transfer property.

Charitable Remainder

This sort of trust is designed to avoid creating a capital gains tax obligation for the beneficiary. Grantors usually employ charitable remainder trusts to handle the transfer of stocks and real estate. As the name suggests, these trusts are intended to help charities.

Special Needs Trust

A special needs trust is one aimed at specifically helping someone who has a physical or mental disability. Normally, the beneficiary has no say in how often distributions are made or how much is distributed.

The trust is also designed to make sure the beneficiary doesn't run afoul of rules from Social Security. Otherwise, there's a real risk the beneficiary might have too much income and no longer qualify for life-sustaining aid from Medicaid or Medicare. Special needs trusts usually outline what the money can be used for, such as medical devices, dietary concerns, and in-home care.