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I'm not a tax professional nor a trust attorney, but here is what I know about trusts. WTR's reply is correct, but there is more to it. I suggest that you educate yourself in this matter more in-depth. There is a ton of free information on trusts and estate taxes on the www.
I did exactly that before I created my own trust. My wife and I created a revocable marital living trust with a disclaimer (by-pass) option. We funded this trust with most of our assets, except for our IRA's and annuities. We are leaving everything to each other and are each other's trustee. Because of the unlimited marital exemption there are no estate (death) tax consequences. If I were to die, the trustee has to determine the value of my estate which, like in most marital cases, is about one-half of the market value all marital property at the time of my death. The trustee will have to file an estate tax return if the value of my estate is greater than the personal lifetime exemption, now at $675,000. We avoid probate and then acting trustee disburses the decedent's estate in accordance with his trust and pour-over will. My wife can keep it all, or by-pass some of my estate to our children under the "disclaimer" option. Today she could by-pass up to $675,000 to our children totally free from estate (death) taxes. Our children would not realize any capital gain taxes unless they were to sell the inherited assets for more than than determined value or cost basis at the date of my death. An IRA is fully taxed at time of death unless it can be rolled over into the IRA of a qualified beneficiary. In case your dad has annuities you should seek the advise of an tax attorney.
If my wife were to die later, her trust would achieve the very same outcome as discussed, without probate, under the control of my daughter, the successor trustee of our individual trusts. Thus, if we were to die in a plane crash, the successor trustee could by-pass each of our current $675,000 personal exemption, free from death taxes.
If your dad's estate is greater than the current $675,000 estate tax free exemption (it will go up to $1,000,000 by 2006) he could spend it down through annual gifts of up to $10,000 per recipient. Why pay the estate or death tax which starts with 37%? Of course, we can pray for the repeal of the estate tax.
I do hope that the information that I provided here helps you and your dad in planning his estate. If I can be of any additional help you are welcome to contact me at

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