Living Trust FAQ

An introduction to living trusts—a popular way to avoid probate.

What is a living trust?

A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust. For a comprehensive guide to serving as a trustee, read Nolo's The Trustee's Legal Companion, by Carol Elias Zolla and Liza Hanks (Nolo).

A "living trust" (also called an "inter vivos" trust) is simply a trust you create while you're alive, rather than one that is created at your death.

Different kinds of living trusts can help you avoid probate, reduce estate taxes, or set up long-term property management. For details on creating a living trust, see Making a Living Trust: Can You Do It Yourself?

Why should I make a living trust?

The big advantage to making a living trust is that property left through the trust doesn't have to go through probate court. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it.

The average probate drags on for months before the inheritors get anything. And by that time, there's less for them to get: In many cases, about 5% of the property has been eaten up by lawyer and court fees. To learn more about how you can avoid probate, read 8 Ways to Avoid Probate, by Mary Randolph (Nolo).

In addition to probate avoidance, a living trust has a few other benefits.

Still, not everyone has to worry about probate, and some people don't need a living trust at all. To find out whether a living trust is right for you, see Why You May Not Need a Living Trust.

How does a living trust avoid probate?

Property you transfer into a living trust before your death doesn't go through probate. The successor trustee—the person you appoint to handle the trust after your death—simply transfers ownership to the beneficiaries you named in the trust. In many cases, the whole process takes only a few weeks, and there are no lawyer or court fees to pay. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.

For more details, see How Living Trusts Avoid Probate.

Is it expensive to create a living trust?

A basic living trust isn't much more complicated than a will, and you probably won't need to hire a lawyer. With a good self-help book or software program, you can create a valid Declaration of Trust (the document that creates a trust) yourself. If you run into questions that a self-help publication doesn't answer, you may need to consult a lawyer, but you probably won't need to turn the whole job over to an expensive expert. You can make a living trust using Quicken WillMaker & Trust.

Making a living trust work for you does require some crucial paperwork. For example, if you want to leave your house through the trust, you must sign a new deed, showing that you now own the house as trustee of your living trust. This paperwork can be tedious, but the hassles are fewer these days because living trusts have become so common.

For more on holding property in a trust, see Make A Living Trust: A Quick Checklist.

Is a living trust document ever made public, like a will?

No. A will becomes a matter of public record when it is submitted to a probate court, as do all the other documents associated with probate—inventories of the deceased person's assets and debts, for example. The terms of a living trust, however, need not be made public.

Learn more about how a living trust preserves your privacy.

Does a living trust protect property from creditors?

No. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name.

Generally, after your death, all property you owned—including assets held in a living trust—is subject to your lawful debts. For example, if your house is held in trust and passes to your children at your death, a creditor could demand that they pay the debt, up to the value of the house. Ownership of real estate is always a matter of public record, so creditors can always find out who inherited real estate. It can be more difficult for creditors to know who inherits other property, however (because a trust document, unlike a will, is not a matter of public record), and they may not bother tracking it down.

On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they're out of luck forever.

Still wondering whether a living trust is right for you? Check out Why You May Not Need a Living Trust.

If I make a living trust, do I still need a will?

Yes, you do—and here's why:

A will is an essential back-up device for property that you don't transfer to yourself as trustee. For example, if you acquire property shortly before you die, you may not think to transfer ownership of it to your trust—which means that it won't pass under the terms of the trust document. But in your will, you can include a clause that names someone to get all of the property that you haven't left to a specific beneficiary.

If you don't have a will, any property that isn't transferred by your living trust or other probate-avoidance device (such as joint tenancy) will go to your closest relatives in an order determined by state law. These laws may not distribute property in the way you would have chosen.

For more on wills, see Nolo's Wills FAQ. And to see everything Nolo has to offer when it comes to planning your estate, visit Nolo's Wills, Trusts & Estates Center.

Can a living trust reduce estate taxes?

A simple probate-avoidance living trust has no effect on state or federal estate taxes.

Keep in mind that for deaths in 2024, only estates worth more than $13.61 million will owe federal estate tax. This means that very few people have to worry about this tax. This exemption amount will increase with inflation.

In the past, AB trusts were used to help couples save on estate taxes. However, the large personal exemption and "portability" for spouses make AB trusts largely unnecessary. To learn more, read Tax-Saving AB Trusts.

Does my living trust need an EIN?

A revocable living trust does not normally need its own TIN (Tax Identification Number) while the grantor is still alive.

During the grantor's life, the trust is revocable and taxes are paid by the grantor as an individual, using the grantor's SSN (Social Security Number). In other words, when an institution requests an SSN or EIN (Employer Identification Number) for trust property, the grantor just uses his or her own SSN. When the grantor dies, the living trust becomes irrevocable and the successor trustee will get an EIN from the IRS to pay the trust's taxes.

For shared property in shared living trusts, the grantors can use either person's SSN. When choosing which SSN to use, keep in mind that income on trust property will be reported through the SSN you select. This won't matter to couples who file taxes jointly, but it could make a difference to couples who file taxes with separate returns. For individually owned property in a shared living trust, use the owner's SSN.

Read more about The Trustee's Job.

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