For many people (and myself for a period of time), understanding the concept of a trust can be difficult. It need not be. Think of a trust as being a business. You are creating a new legal entity. If you create it during your lifetime, you don't even have even get a separate tax id number for your trust. Instead, much like a sole proprietorship or partnership, your trust will be treated as an extension of you as an individual (or individuals in the case of a joint trust).
- Business Plan: Your trust document will contain your business plan. This plan will include important components to ensure its success both now and into the future. For example, your plan will probably provide that you will be in full control of your property while you are alive and well. It will also provide for a seamless transfer of control over your affairs should you become disabled at any point in your life (and that trasnsfer should be structured in a way that excludes lengthy and expensive court involvement). Finally, you'll have instructions that give whatever property you have in your trust to whom you want, when you want, and in the way you want. Some people even take the extra step of documenting some of the key values and principals they want to pass on, including how they feel about their loved ones.
- Finances & Management: Once your trust is established (either now by signing it in front of a notary in the case of a living trust-based plan, or upon your death upon order of the probate court in the case of a will-based plan), you start funding your trust with of all of your assets (except for retirement accounts). For example, your trust will own the interest in your your house, land, bank accounts, investments, and life insurance. Again, remember that while you are alive and well you have full control to manage your trust assets just as you're used to doing right now. You can also change the terms of your trust document (or business plan) anytime that you want to while you are alive and well. Regardless of whether or not you make any changes, it is important to briefly review your plan every year to make sure it stays on track with your life situation.
- Succession & Transfer: If you become disabled during your life, your successor trustee (the person you named in your business plan to succeed you) will be able to manage your affairs on your behalf. When you pass away, your trust doesn't die, but lives on to provide for the transfer of your assets in any way or over any length of time that you desire. Children's inheritances are protected from creditors as long as their property stays in the trust as opposed to being owned in their own name (kind of like a corporation or an LLC). My trust by the way, provides that my children's shares will remain in their trusts until they are 40 years old. I've drafted many that gave it all outright, and many that included lifetime trusts for each child. There is no right or wrong way to do it, just find the way that suits your values and your personality.
That's pretty much all there is to it. Trusts are really pretty simple creatures when compared to a well organized business.