A "living" trust (also called an "inter vivos" trust) is simply a trust you create while you're alive. The beneficiaries you name in your living trust receive the trust property when you die. You could instead use a will, but wills must go through probate—the court process that oversees the transfer of your property to your beneficiaries.
Many people create a revocable living trust as part of their estate plan. These trusts can be modified or revoked at any time. Typically, you'll name yourself as the "trustee" of your trust. This means that while you are alive, you retain control of the trust and its property. In your trust document, you will also name a "successor trustee" to take over and manage the trust (distribute your property) after you die. (If you create a shared living trust, as is often done by spouses, then your successor trustee would assume control after both spouses have died.)
In contrast, irrevocable trusts cannot be revoked or modified after they are signed. Irrevocable trusts can be useful tools for specific goals, like reducing taxes, but they require giving up ownership and control of trust property.
When you set up a living trust to transfer your property to your loved ones after your death, you can potentially save them time, hassle, and money. Property left through a will (rather than a living trust) might be tied up for months or even years in probate court, and could involve significant court costs and lawyers' fees. By contrast, property left through a trust can be distributed to your beneficiaries almost immediately, and often without the need for an attorney.
Some states have fully adopted a model law called the Uniform Probate Code, which streamlines the probate process, but unfortunately Kentucky is not one of these states. However, Kentucky does offer a simplified probate process for small estates. A surviving spouse or children can petition the court to use this shortcut if the value of the property subject to probate is $30,000 or less. (You might be surprised to find that not all of your property is subject to probate.) Anyone who paid "preferred claims," which are debts of the estate that are prioritized, like funeral expenses and taxes, can petition for this simplified process as well. In Kentucky, this shortcut is also called "dispensing with administration."
If simplified probate is available to your estate, you might not need to worry about making a living trust just to avoid probate.
Yes, you'll still need a will. This might seem confusing—isn't the point of a living trust to avoid needing a will? Yes, it is, and your will might never be used. But you should still write one, for one or both of the following reasons:
Probably not. Most people do not need to worry about federal estate taxes because the federal estate tax is levied only on estates worth close to $12 million (or almost $24 million for married couples). Kentucky does not have its own estate tax (but note that Kentucky is one of a few states that does have an inheritance tax.)
If you have an estate worth close to $12 million (or you and your spouse or partner have a combined estate of close to $24 million), you might be able to use a more complicated trust (such as an AB trust) to reduce or avoid estate taxes.
To make a living trust in Kentucky, you:
You can use WillMaker & Trust to make a living trust using your computer. It has a simple interview format that allows you to complete the trust at your own pace, and it gives you lots of legal and practical help along the way. Based on your responses, the program produces a living trust document customized for you and your situation. With WillMaker & Trust, you can also make a will, powers of attorney, health care directives, and many other useful documents. Use it just for yourself or for your entire family.
For more on Kentucky estate planning issues, see Kentucky Estate Planning.