Living Trust
What Is a Living Trust?
A living trust is a legal arrangement created during a person’s lifetime that holds assets for the benefit of designated beneficiaries. The trust allows assets to be managed during the individual’s life and transferred to beneficiaries after death according to the trust’s instructions.
Living trusts are commonly used as part of estate planning strategies.
Why It Matters
Living trusts can help simplify estate administration and may allow assets to pass to beneficiaries without going through probate. They can also provide privacy and ensure assets are managed according to the trust creator’s instructions.
In addition, living trusts can help manage assets if the creator becomes incapacitated.
How a Living Trust Works
A living trust is established when a person creates a trust agreement and transfers ownership of certain assets into the trust.
The process usually involves:
- drafting a trust document
- transferring assets into the trust
- appointing a trustee
naming beneficiaries
During the creator’s lifetime, the trust may continue to hold and manage the assets.
Example
A homeowner places their house and investment accounts into a living trust so that these assets can pass directly to their heirs without probate.
Living Trust vs Will
- A living trust manages assets during life and distributes them after death.
- A will provides instructions for distributing assets after death through the probate process.
FAQs About Living Trusts
Can assets be added to a living trust later?
Yes. Assets can often be added as the trust owner acquires new property.
Do living trusts avoid probate?
Assets held in the trust typically avoid probate.
Who manages a living trust?
The trustee manages the trust assets according to the trust document.
Related Terms
