In very simplistic terms, the "Living Trust" is a contract that governs the use, management and ultimate distribution of either just a single asset, a few different assets, or all of your assets. This is much different from the separate joint and survivorship or payable on death contracts which govern stocks, bonds, mutual funds, bank or brokerage accounts.
For the small estates where estate taxes are not a concern, (now under $5,000,000), one can use a Living Trust to transfer assets on death. This kind of trust not only will allow assets within the trust to avoid probate, but it can be used to prevent children from receiving large sums of money at an early age (i.e. age 18), protect the inheritance of spendthrift children, or preserve the inheritance of children of a first marriage in the event of a second marriage by the surviving spouse. Additionally, this kind of trust can provide a degree of professional money management, if a corporate is utilized, enable assets to be transferred quickly, provide a measure of confidentiality as to the kinds and values of assets, and/or ensure funds being available for an aged parent or an incompetent relative.
When using a trust to avoid the probate administration process or meet your other estate planning goals, your assets must be placed in the trust during your lifetime, or at least designate the trust as the beneficiary. Assets which can be placed in a trust include savings and checking accounts, CD's, stocks, bonds and mutual funds. Even the title to your home can be placed in such a trust. Life insurance, pensions and annuities could have the trust named as beneficiary.
The Living Trust must be created and in effect during your lifetime. It is also sometimes called an "inter vivos trust," a "grantor trust," or a "revocable trust."