What Is a Living Trust?
A living trust (unlike a living will, which deals with your wishes about medical care) deals with distributing your assets after you die. However, a living trust does this without using a will. The benefit of a living trust is that, if done correctly, it quickly and efficiently distributes your belongings to your heirs without the expense of going through probate court.
It accomplishes this by using a legal creation called a trust. Generally a trust is an arrangement where one person (the donor) puts property under the care and control of another person, or trustee, to be used for the benefit of a different person known as the beneficiary. For example, if you wanted to leave your children money but did not want them to have access to it until they were 21, you could set up a trust. A trustee could pay your children the interest on the funds until they reached 21, at which time he or she would give them the rest of the funds.
A living trust works the same way, except you make yourself the trustee. According to the law, you would not own the property but would be merely holding it for your beneficiaries until you died. For example, suppose you want to leave your house to your oldest daughter, but you want to live in it until you die. You could leave it to her in a will, but she would have to wait for probate proceedings to conclude first. To avoid this, you can set up a living trust and name yourself as the trustee. When you die, the law should consider the house as your daughter's property, not yours.
A successor trustee is also named in the living trust. This is the person who closes the trust after you die and makes sure that your daughter gets your house. This can usually be accomplished more quickly and cheaply through a living trust than a will. It is also sound practice to draft a backup will to give your daughter the house, just in case the living trust is not effective. If you are interested in passing on property to your heirs outside of the will and probate process, contact an attorney familiar with estates and trusts law.