A living trust is a document that places a person's assets into a trust throughout his lifetime. The assets are given out to beneficiaries designated by the person who created the trust at the moment of his death. A living trust is similar to a will.
There are two types of living trusts, the most common of which is the revocable living trust. This trust gives its creator the ability to transfer whatever assets he chooses into the trust. Throughout the lifetime of the grantor, the creator of the trust, he has the ability to change anything within the trust at any moment he sees fit. An important benefit of the revocable living trust is that it allows the assets to be given to beneficiaries without going through probate once the grantor has died. The downside of this trust is that it does not avoid estate taxes.
On the other hand, an irrevocable living trust gives the grantor the ability to give away assets permanently. Once the assets have been given away they are no longer owned by the grantor. Because all ownership of the asset is given away on an irrevocable trust, the estate tax is potentially reduced or removed completely.