An Introduction to the Living Trust

First of all, what is a "living trust"? Basically, a living trust is a legal entity that you can move your assets into for various reasons, including to avoid probate after you pass away. Also, if desired, the assets in your living trust can be controlled by another person. The person setting up the trust is called the settlor or the trustor, and the person who can control the trust is the trustee. A third person may be involved, the beneficiary, if the assets are administered for their benefit.

The "living" part means that the trust is in effect while the settlor is still alive, which makes it different from a trust created with a will at the time of death. Because the settlor is still alive, they have control over the trust and can revoke the arrangement at any time. Sometimes the term "revocable living trust" is used to reflect this.

It's actually quite common for the settlor, trustee and beneficiary to all be the same person. You can establish a trust for your own assets, be your own trustee and then use those assets to pay your bills (which makes you the beneficiary). For a married couple, husband and wife can be co-trustees of a trust.

People can be leery of living trusts because they think they are giving away their assets and losing control. The assets will no longer be legally in their name, but as they are still in control of the trust.

A agreement should include details on how to proceed should the trustee pass away, and also have an ultimate plan for asset distribution. A trust provides control and continuity in that you can continue the same trust after your death to handle and allocate your assets.

If your assets are placed into the trust while you are alive, they can still be given to your heirs outside of probate upon your death, which will save a great deal of time and money for your estate. That doesn't mean a living trust is the right answer for everyone. There are other ways of avoiding probate costs as well.

As mentioned, the settlor can change the trust at any time when it is set up as a revocable trust. There is such a thing as an irrevocable living trust (usually used for tax purposes) where you will not be able to revoke the trust once established. Make sure your attorney knows which one you are interested in before proceeding.