Living Trust
A legal arrangement where a trustee holds and manages assets for beneficiaries during the grantor's lifetime and distributes them upon death, avoiding probate.
A revocable living trust is a legal document that transfers ownership of assets to the trust during the grantor's lifetime. The grantor typically also serves as the initial trustee and retains full control. When the grantor dies, a successor trustee distributes assets to beneficiaries according to the trust terms—without going through the court-supervised probate process. This avoids probate delays, court costs, and the public record that probate creates.
Assets must be "funded" into the trust—retitling real estate, financial accounts, and other assets in the trust's name—for the trust to control them. Unfunded assets revert to probate, undermining the trust's purpose. A "pour-over will" typically accompanies a living trust to catch any assets not in the trust at death.
Revocable living trusts do not provide asset protection from creditors during the grantor's lifetime, because the grantor retains control. They are appropriate for people with real estate in multiple states, significant assets, privacy concerns, or complex family situations.
Real-World Example
By placing their home and investment accounts in a living trust, the couple's estate transferred to their children in six weeks after death—avoiding the 12-month probate process their state required.