Living Trust

A living trust — formally called a revocable living trust when created by an individual — is one of the most commonly used estate planning tools in the United States. The grantor creates the trust, transfers ownership of assets into it, names a successor trustee to manage the trust after death or incapacity, and designates beneficiaries to receive distributions according to the trust's terms.

The primary advantage over a simple will is probate avoidance. Assets held in a living trust pass directly to beneficiaries according to the trust document without court supervision. Probate can be time-consuming — often six months to two years in complex estates — and creates public records of assets and beneficiaries. A trust keeps the transfer private and efficient.

A living trust also provides continuity of asset management during incapacity. If the grantor becomes unable to manage their affairs, the successor trustee can step in immediately without a court proceeding, managing investments, paying expenses, and administering the estate according to the grantor's documented wishes.

However, a trust is only effective for assets that have actually been transferred into it. A common and costly mistake is creating a trust but failing to retitle accounts, real estate, and other assets in the trust's name — a process called funding the trust. Unfunded trusts do not achieve probate avoidance, and assets that should flow through the trust end up in the probate estate instead.

A living trust does not replace a will. Most estate plans include a pour-over will that captures any assets inadvertently left outside the trust and directs them into it upon death, though those assets will still go through probate. Trusts also do not provide asset protection from creditors during the grantor's lifetime, since a revocable trust remains under the grantor's control.