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What is a Living Trust?

Preparing for the financial wellbeing of your loved ones is an important step in the estate planning process. A living trust is an excellent way to ensure your assets are transferred to designated individuals at the time of your passing. Living trusts can be confusing if you have no experience with trusts or wills, but with a brief overview you can feel confident when looking into setting one up.

What is a trust?

A trust is a type of financial agreement that allows someone (an institution or an individual) to hold assets on behalf of beneficiaries (people who will receive the benefits of the trust at some point).

What is a living trust?

A living trust is a legal document created by you (the “grantor” or “trustor”) during your lifetime. It names someone (the “trustee”) to manage the trust after your death or incapacity. The living trust identifies your assets and the beneficiaries that should receive these assets after your death.

Living trust vs. will

The main difference between a living trust and a will is that a living trust avoids probate, while a will does not. Probate is the court-supervised process of administering a deceased person's estate. It can be time-consuming and expensive. But if you have a living trust, your assets can usually be distributed without going through probate.

Living trust vs. revocable trust

A revocable trust is a type of living trust that is created during an individual's lifetime which they can change, alter, or terminate at any period. Any assets in a revocable trust are outside of probate, but due to the fact that the grantor has control of the trust while they're alive, the assets in the trust are part of that individual's taxable estate.

What about irrevocable living trusts?

An irrevocable living trust is a trust where the individual creating the trust (the guarantor) gives up all ownership rights at the time they are transferred to the irrevocable trust. An irrevocable trust cannot be altered, amended, changed, or terminated by the guarantor. If the guarantor has given up all control over the assets, the income from the assets in this type of trust are not included in that individual's taxable estate. Irrevocable trusts can also protect assets from creditors if it's set up properly.

What are the benefits of a living trust?

The main advantage of a living trust is that it can help avoid probate. Probate is the legal process of administering the estate of a deceased person. It can be expensive, incredibly time-consuming and public.

If you have a living trust, your assets are held in the trust and do not need to go through probate. This means that your beneficiaries can receive their inheritance more quickly and without having to deal with the court system.

A living trust can also help you plan for incapacity. If you become incapacitated, the trustee can step in and manage your assets on your behalf. This can help avoid a guardianship or conservatorship proceeding, which can be costly and intrusive.

Finally, a living trust can provide privacy. Probate is a public process, which means that anyone can request information about your estate. If you have a living trust, your assets are not subject to probate, so they remain private.

Another benefit of a living trust is that it can be revoked or amended at any time (provided it is a revocable trust), as long as the guarantor is alive and has mental capacity. This flexibility can be helpful if your circumstances change.

Can I set up a living trust online?

Yes, you can set up a living trust online. There are many companies that offer this service. You will need to provide some basic information, such as your name, address, and the names of your beneficiaries. You will also need to choose a trustee and decide how you want your assets to be distributed.

What is the cost of setting up a living trust?

The cost of setting up a living trust varies depending on the company you use and the complexity of your estate. However, it is generally much less expensive than going through probate. In general, if you use an online book or service, you can expect to set one up for under $100. However, if you have a larger estate or need to use an attorney, you’ll most likely be spending over $1,000.

What kind of documentation do I need to set up a living trust?

To set up a living trust, you will need to prepare a living trust document. A living trust document typically includes the following information:

  • The name of the trust and the date it was created
  • The names of the trustee and the beneficiaries
  • A description of the property to be held in the trust
  • Your instructions for how you want the property to be managed and distributed after your death

You will also need to transfer your assets into the trust. To do this, you will need to prepare and sign a deed or other transfer document. This document should be filed with the county recorder's office. You may also want to prepare a pour-over will. This type of will directs that any assets that are not in the trust at the time of your death be transferred into the trust after your death. This can help ensure that all of your assets are properly distributed according to your wishes.

Do I need a living trust attorney to get started?

While you are not required to have an attorney to set up a living trust, it is a good idea to consult with one. An attorney can help you understand the process and make sure that your documents are properly prepared.

An experienced estate planning attorney can also help you determine if a living trust is right for you and advise you on other estate planning options.

If you do decide to use an attorney, be sure to shop around and compare fees. Attorneys typically charge by the hour, so you should get an estimate of the total cost before you begin.

You can also find living trust forms online. These forms can be used to create a basic living trust. However, it is generally a good idea to have an attorney review the forms before you sign them, especially if you have a larger estate.

Creating a living trust is a big decision. Be sure to do your research and consult with an attorney before getting started.

Living trust sample

This sample living trust agreement is between John Smith, the grantor, and Jane Doe, the trustee.

  1. Grantor. I, John Smith, hereby grant to Jane Doe, my wife, all of the property I own at the time of my death, including but not limited to:

  2. Real property: My home and all real property I own, including any vacation homes, investment property, or undeveloped land.

  3. Personal property: My car, furniture, jewelry, art collection, and any other personal belongings.
  4. Financial assets: My bank accounts, investment accounts, life insurance policy proceeds, and retirement account proceeds.

  5. Trustee. I appoint Jane Doe as trustee of this trust. I direct her to hold and manage the property for the benefit of my children, John Smith Jr. and Jane Smith.

  6. Beneficiaries. My children, John Smith Jr. and Jane Smith, are the beneficiaries of this trust. They will receive all of the trust property when they reach the age of 18.
  7. Management of trust property. I direct the trustee to use the trust property to support my children until they reach the age of 18. She may use the property for their education, medical expenses, and basic living expenses.
  8. Distribution of trust property. When my children reach the age of 18, they will receive all of the trust property. My daughter, Jane Smith, will receive her share first. If she dies before receiving her share, it will go to my son, John Smith Jr.
  9. Amendment and revocation. I may amend or revoke this trust at any time by providing written notice to the trustee.
  10. Governing law. This trust agreement is governed by the laws of the State of California.
  11. Execution. I have executed this trust agreement on [date].

John Smith, Grantor

Feel confident in your estate planning by using Ever Loved’s free resources. Ever Loved’s comprehensive checklist will help you make sure your family has the information they need to easily handle logistics after a death.

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Last updated June 1, 2022
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