A trust is an arrangement where a trustee holds legal title to property for another person – a beneficiary. A “living trust” is a trust that you can create while you’re alive, rather than one created at your death, which is called a “testamentary trust.” Unlike a testamentary trust where you appoint another person to be the trustee, you can be the trustee of your own living trust keeping full control over all property held in trust.
There are several advantages to living trusts. For example, living trusts can help you avoid probate and reduce estate taxes. Probate is the court-supervised process of paying your debts and distributing your property. Property left through the trust doesn’t have to go through probate court. It is often desirable to avoid probate because it can take several months before beneficiaries receive income or property. Also, probate can also be expensive due to court and legal fees.
A basic living trust is not necessarily a complicated instrument, however creating a living trust does require the preparation of some important paperwork. For example, if you want to leave your house through the trust, you must sign a new deed showing that you now own the house as trustee of your living trust. It is very helpful to hire an attorney who can handle the paperwork for you to create exactly the type of trust that will work best for you.
Another appeal of a living trust is that it offers more privacy than a will that will go through probate. A will becomes a matter of public record when it is submitted to a probate court, as do the associated documents such as inventories of the deceased person’s assets and debts. To explore the advantages of creating a living trust, consult with an experienced estate planning attorney.