Reasons for establishing a living trust
In an estate planning context, living trusts are usually established in order to avoid probate. Living trusts can help you avoid probate because when you die, the assets in the trust are no longer your property. Instead, the assets in the trust are the property of your successor trustee. Because of this, the assets in the trust are not subject to probate and can seamlessly pass to the beneficiaries of the trust. Be aware that only the assets in the trust can avoid probate in this way. Any assets not in the trust will have to go through probate.
If you are the sole trustee of the trust, the document used to create the trust is called a “declaration of trust.” If the trust has a trustee or trustees other than you, the document used to create the trust is called a “trust agreement.”
Living trusts can maintain a certain amount of privacy around assets and the distribution of those assets, as only the trustees of the trust need to know the terms. This is unlike a testamentary trust, which is a part of a will and is therefore a public document.
Living trust cost
Living trusts can potentially be expensive to create, as each trust needs its own paperwork. This is unlike creating a testamentary trust, which can be created as a part of your will.
Revocable vs. irrevocable
To learn about setting up a trust in your will, see our article Testamentary Trusts.