A living trust is one way to manage your property. You get the full benefits while you are alive, and your "successor trustee" can manage your property for you if you become incapacitated. If properly funded, a living trust also lets you pass your property to your loved ones (or charities) after your death without having to go to probate.
A living trust is set up during your life. Certain property is transferred into the trust while you are still living. After you die, the property can be transferred to your beneficiaries without probate.
Remember, a living trust only covers the property put into it. A "pour-over will" should always accompany a living trust. A pour-over will is a legal document that makes sure your remaining assets automatically transfer to a trust you set up. If the pour-over will is invoked, you still need probate.
It is always best to talk to a lawyer who can help you decide if a living trust is right for you. If you decide to set up a living trust, the lawyer can draw up the papers to make sure it fit your needs. Then the lawyer can help you put the property in the trust. A one-size-fits-all trust form may not help you.
Beware of anyone who pressures you to buy a living trust package. Do not deal with anyone who wants you to sign something right away or to pay money before you have a chance to do more research. Some companies only want to sell their pre-packaged plans. They don’t care how well the plan meets your needs. If a do-it-yourself trust is not done right, it can cause problems that cost money to fix.
Even though it is possible to make a basic living trust on your own it is very hard without the help of a lawyer. A lawyer looks at your situation and can explain things to you. If you don’t have a lot of assets and you are not trying to restrict access to money that you are leaving someone, a trust probably does not make sense for you.
Basically, you make or set up a trust by signing a trust agreement. The agreement must be signed by:
the person whose money and property will be managed by the trust (the Settlor - you) and
the person who will be managing the trust (the Trustee).
The trustee must follow the directions you put in the trust papers. The trustee also has to follow laws about administering the trust and managing property.
Then you transfer ownership and control of your property to the trust. The people who get the benefits now and the people who get your property after you die are called beneficiaries. You are typically the beneficiary while you are alive.
Trusts are confusing and expensive. Think about it carefully and get legal advice. There are often easier ways to avoid probate.
In a typical living trust, you would be the settlor, the trustee, and a beneficiary. This just means that it is your property, and you manage it while you are alive. When you die, the property is given out to the other beneficiaries that you named in the trust.
Note: You do not have to be the trustee. The trustee can be another person or a financial company, like a bank. You should appoint an alternate trustee to take over when you can’t manage the trust anymore and when you die. If you don’t appoint someone to take over, then a court gets involved –that is expensive and may not be what you want!
Yes. This is one great benefit of a living trust. After your death, the trustee or alternate trustee, can give out the property in the trust to the beneficiaries without going to court. This avoids the cost and delay of probate. Also, using a trust is a private process, not like probate which makes the file public for anyone to look at. See our fact sheet, Questions About Probate.
If 2 people own property together in joint tenancy, there is usually no probate for that property. When one dies, the property automatically belongs to the survivor.
There is no need to probate assets that name a beneficiary. For example, life insurance money goes automatically to the named beneficiary without probate. So does a bank account or retirement accounts if a beneficiary is named.
You can use a Transfer on Death Deed instead of probate to give your house to someone when you die. See our fact sheet, Transfer on Death Deeds.
If the living trust is set up while you are competent, the trustee (or the alternate trustee) manages the trust property for you if you become incompetent. The property must be managed for your benefit as long as you are alive.
IMPORTANT: You need to have a power of attorney for your property that is not in the trust. For example, an IRA cannot be put in your trust. An IRA always has to stay in your name. See our fact sheet Powers of Attorney.
Probably not. This is because financial assets can be managed using a power of attorney and can be given to who you want by naming a beneficiary on your financial accounts and your real estate.
But sometimes, there may be a good reason you want money managed in a trust. A good example is if you have many people you want to give your property to at your death. You may not be able to do this with a transfer on death deed or a beneficiary designation on your bank account.
Generally, no. If you apply for Medical Assistance (MA) to pay for long-term care, the state treats your assets in the trust as available assets. This means they are assets you could use to pay for your care. You would have to use these assets up to be eligible for benefits like MA. These possible problems are another reason to talk to a lawyer to see if a trust makes sense for you.