Table of Contents
- What is a living trust?
- What is probate?
- Do I need a living trust?
- How does a living trust avoid probate?
- Is it expensive to create a living trust?
- Is a trust document ever made public, like a will?
- Does a trust protect property from creditors?
- Do I need a trust if I'm young and healthy?
- Can a living trust save taxes?
What is a living trust?
A living trust is an entity that exists only on paper (similar to a corporation) but is legally capable of owning property. However, a live person called the trustee must be in charge of the property. You can be the trustee of your own living trust, keeping full control over all property legally owned by the trust.
A living trust (also called a revocable trust, revocable living trust, or inter vivos trust) is one you create while alive rather than one created upon death under your will.
Property held in trust is actually "owned" by the trustees, subject to beneficiaries’ rights. The trust itself doesn't own anything. All living trusts are designed to avoid probate, some help save estate taxes, others help with long-term property management.
What is probate?
Probate is the legal process of paying a deceased person’s debts and distributing their estate. It usually entails:
- Appointment of a court-approved executor (personal representative).
- Proving the will is valid.
- Informing creditors, heirs, and beneficiaries.
- Disposing of the estate according to the will or state law.
Executors must file a petition with the court after death. Probate may require legal assistance depending on asset size and complexity. Jointly owned assets, life insurance, and IRA proceeds paid directly to beneficiaries are not subject to probate.
Do I need a living trust?
A living trust is useful for estate and tax planning, keeping your estate out of probate. It may be especially helpful if you have a disabled beneficiary, property in another state, or want to simplify estate administration for your heirs.
How does a living trust avoid probate?
Property transferred into a living trust before death bypasses probate. The successor trustee transfers ownership to beneficiaries directly, usually within weeks, without lawyer or court fees. The trust ends once property is fully transferred.
Is it expensive to create a living trust?
Cost depends on complexity. More complex trusts are more expensive. Fees are paid upfront, but a living trust can save money and time by avoiding probate court.
Is a trust document ever made public, like a will?
A will becomes public when submitted to probate. Living trust terms do not need to be public.
Does a trust protect property from creditors?
Revocable trusts do not protect assets from creditors. Creditors can pursue trust property as if you owned it. After death, property in a living trust can be quickly distributed to beneficiaries, sometimes making it harder for creditors to claim it. Probate can provide limited protection by notifying known creditors and enforcing deadlines.
Do I need a trust if I'm young and healthy?
Often not. Young, healthy individuals typically need a will and perhaps life insurance to ensure property is distributed as desired and children are cared for. A trust may not be necessary at this stage.
Can a living trust save taxes?
A simple living trust does not reduce income or estate taxes. More complex trusts may reduce federal estate tax if your estate is expected to owe taxes at death.
This Content is for informational purposes only. Nothing herein constitutes accounting, tax, financial, investment, legal or other professional advice. Seek advice of a licensed professional before making any decision.
