Although there are many different types of trusts, most people who generically mention trusts are referring to the revocable or living trust. People create this kind of trust while they are living, rather than after their death. In addition, the creator of the trust, also known as the trustor or grantor, generally has the right to revoke or end the trust at any time while still alive and competent to make financial decisions. Due in large part to this flexibility, the revocable trust is often used as a person's primary estate-planning document, establishing who should receive the grantor's property after death.

Often, the grantor of a revocable trust will also choose to act as its initial trustee. The trustee is responsible for following the trust's instructions and managing its property. The grantor may also name successor trustees to take over, either after the grantor's death, or in the event that the grantor is unable to make financial decisions.

A revocable trust also lists the people who are entitled to the trust's property -- its beneficiaries. Most revocable trusts name the grantor as sole beneficiary during his or her lifetime. After death, the trust may terminate, paying out all of its assets to one or more beneficiaries, or continue for the benefit of others. If the trust continues, certain beneficiaries commonly receive money or property from the trust right away (the current or income beneficiaries), while others may receive trust assets at a later date (the future or remainder beneficiaries).

Revocable trusts are primarily used to transfer property at death without going through the court procedure known as probate, which is often necessary when a will is used as the primary estate-planning document. These trusts also provide for a smooth transition of financial decision-making power if the grantor is seriously injured or too ill to make financial decisions. These trusts are usually designed to own all or almost all of the grantor's property, whether it be real estate, stocks, bonds, other financial assets, or tangible property such as artwork, cars, or any other valuable objects. A well-drafted revocable trust can create a road map for a person's family for generations to come.

Read more in our series about trusts:

You're never too young or too old to start your retirement planning. Why not get your feet wet with a risk-free trial to Motley Fool Rule Your Retirement ?

Fool contributor Dan Caplinger welcomes your comments at dan_caplinger@yahoo.com.