What is a Living Trust?

A Living Trust is a special legal entity that is legally capable of owning your property. You can be the person in charge of the Trust, that is a "Trustee" of your own Living Trust, keeping full management and control over all property transferred by you to the Trust.

There are many kinds of trusts. A "Living Trust" (also called an "inter vivos" trust) is a trust you create while you are alive, rather than one that is created at your death under the terms of your Will (a Testamentary Trust).

Revocable Living Trusts are specifically designed to avoid probate of your estate after your death and, as the name suggests, may be amended or revoked by you during your lifetime.

Why should I use a Living Trust?

If you don’t take the appropriate steps now to avoid probate proceedings, then after your death, your property will likely pass through a lengthy and costly probate proceeding before "the leftovers" reach the people you want to inherit it from you. Probate is the court-supervised process of paying your debts, paying attorney’s and executor’s fees and then distributing your remaining property to the rightful heirs and/or beneficiaries of your estate. A Living Trust avoids probate.

The average probate case takes over a year to complete! By that time, there is significantly less property remaining for your heirs since a whopping 3% to 8% of the property will have been diverted by lawyers, accountants, appraisers, court costs and other fees. The exact amount depends on state law and the fees charged by lawyers and others hired by the executor to administrate and probate your estate.

Why do I still need a Will if I use a Living Trust?

You need a so-called "Pour-Over Will" as a transfer device for property that you fail to transfer to your Living Trust during your lifetime. For example, if you acquire certain property shortly before you die, you may not have transferred ownership of it to your Trust. Consequently, the property may not pass under the terms of the trust document. But your "Pour-Over Will" includes language that directs your Executor to transfer or "pour-over" into the Trust any property that is not held in your Trust at the time of your death.

If you don’t have a Will, any property that is not transferred by your Living Trust or other probate avoidance device (such as joint tenancy) will go to your closest relatives, i.e. "heirs," in the order determined by state law. Invariably, this may not distribute the property in the way you would have preferred.

How does Living Trust avoid Probate?

All property that you transfer into your Living Trust during your lifetime will not be required to go through probate. Your Successor Trustee, the person you name to handle the trust after your death, will be directed to transfer the property to the "beneficiaries" you named in the Trust. Usually the whole process takes only a few weeks, and there need not be any legal or court fees to pay. When your property has all been transferred to your beneficiaries, the Living Trust simply terminates.

Is it expensive to do a Living Trust?

Lawyers typically charge between $1,000 and $2,000 or more to draft a Revocable Living Trust and related documents. If you retain a lawyer to draw up your Living Trust and associated forms, you might pay as much now as your heirs would have to pay for probate after your death–which means the Trust may not offer any net savings in some cases.

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Is it difficult to transfer property into your Living Trust?

Not at all and nothing really changes except the formal name on title. For example, if you want to leave your home to loved ones through the Trust, you simply record a Quitclaim Deed (included in our forms package) to transfer ownership of the house from you as an individual to you as Trustee of your Living Trust. With regard to bank accounts, a new signature card must be signed by you as Trustee. Most bank officers are quite familiar with this simple procedure. TRUST FUNDING INSTRUCTIONS are included in the package to assist you.

Is a Living Trust normally made a public record, like a Will?

No! A Will, unlike a Trust, becomes a matter of public record when it is filed, as required, with the probate court. All of the other documents associated with probate actions also become a public record, e.g. inventories of the deceased's assets, lists of creditors, heirs, etc. The terms of a Living Trust are rarely made public.

Who should use a Revocable Living Trust?

Anyone who wishes to avoid time-consuming and expensive legal proceedings over their estate when they either die or become incapacitated should use a Living Trust. This is especially true for those who want their surviving family members to receive all of their property without contests, disputes, high legal fees and other expenses.

Does a Revocable Living Trust protect property from creditors?

Unfortunately, holding assets in a Revocable Living Trust does not shelter your assets from your creditors during your lifetime. A creditor who obtains a judgment against you can collect from the Trust property just as if you still owned it in your name, individually. However, after your death, property in a Living Trust is quickly and quietly distributed to your beneficiaries (unlike property that must go through public Probate proceedings). This expedited process can be quite problematic for creditors. Usually by the time creditors (who are unknown to the beneficiaries) learn about your death, your property may have already been dispersed, and the creditors have great difficulty determining exactly what you owned and where it went. Often, it may not be worth the creditor’s time and expense to try to track down the property and attempt to collect from the new owners (your beneficiaries).

Who controls my property in the Trust?

While acting as Trustee of your own Revocable Living Trust, you will continue to exercise full management and control of your property, maintaining the ability to receive all income, withdraw principal, buy and sell assets, make gifts, etc. The only readily apparent change is your new title: "Trustee."