How Does a Living Trust Work?

A living trust is a trust created while the trustee is still alive. You keep control of your property and hold the legal title. Some living trusts can help avoid probate and offer other benefits such as reducing estate taxes.

Probate Court

A living trust does not have to go through the probate courts, or courts designed to pay your debt and distribute assets upon your death to those that inherit it. In a living trust you’ve already done the probate part of the equation, tentatively helping your beneficiaries receive more upon inheritance than they would if it had to go through probate. Probate can take as much as 5 percent of the value of the estate by court and lawyer fees.

Wills and Living Trusts

You will still need a binding will when you have a living trust. The will would work as a back-up for the property that is not transferred in a living trust. It helps when there are items that you acquire before your death but after your living trust is set up. Without a will, those items are going to be going to your nearest relative and not whom you’d like it to go to.

Living Trust Disadvantages

Living trusts are time consuming compared to wills. There is much more to have to modify and there is more long-term maintenance in having one. They can be expensive, around $1,000 if done by a lawyer, although some of those costs can be reduced if you do it with a DIY kit. Even with a living trust, you’ll need a will, and a will is a lot cheaper and easier to change than a living trust.