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What is a living trust?

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living trust

A living trust is an estate planning document used to distribute property upon death while avoiding probate court. It is called a "living" trust because it is created while the property owner is alive, rather than upon his or her death.

When you create a living trust, you transfer ownership of your assets into the trust, which is then administered for your benefit (usually with yourself as trustee). Upon your death, the trust's assets are distributed according to your wishes. Most living trusts created as part of an estate plan to avoid probate are revocable, meaning the terms of the trust can be easily amended, and the trust can even be completely dissolved if you change your mind. The probate process can take many months, while a trust's assets can be distributed in little time as a few weeks.

In addition to avoiding probate, a living trust can help you keep your estate plan private, since it does not become a public record (unlike a will). It can also help you avoid court-supervised guardianship or conservatorship if you specify how mental incapacity should be determined, and you appoint a successor trustee to manage the trust in the event you are mentally incapacitated.

Note that even if you have a living trust, you should still have a will to dispose of any assets that are not in the trust or controlled by a right of survivorship. Your will can (and probably should) contain a "pour over" clause that provides for the transfer of all of your assets to the trust upon your death. You can also name guardians for minor children in a will.

Not everyone needs to or should have a living trust. If you have few assets and no children, you probably don't need one. But the more assets you have, the more beneficial a living trust can be.

It is possible to create a living trust on your own - a Google search for "DIY living trust" turns up nearly two million results. You can get guidance from a book, or create a living trust electronically online or with purchased software. However, to ensure that all of the assets you want in your trust make it into your trust, it might be best to hire an attorney who specializes in estate planning. An estate planning attorney will draft the trust agreement, and advise you on how to transfer your assets into the trust. He or she will also let advise you if certain assets should not be put into the trust. He or she may even offer to handle real estate recordings for you at no extra cost. To find a good estates attorney, ask friends for referrals and check with your state bar for certified specialists.

About Cathy

Cathy is the founder of Chief Family Officer, where you can get daily updates on the hottest deals, and tips to achieve financial freedom and family bliss.

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