The Definition of a Living Trust
A trust designates one person, a trustee, to legally hold the title to property for another person, the grantor. A living trust is a term for a trust one creates while he is still alive. As such, a person can be the trustee for his own living trust.
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Function of a Living Trust
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One of the big advantages to setting up a living trust is that the trust property doesn't have to go through a probate proceeding after the beneficiary's death. The successor trustee named in the trust will simply transfer ownership to the beneficiaries named in the trust. When this is complete, the living trust is over.
Anyone Can Draft a Living Trust
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A living trust isn't any more complicated than a simple will. In most cases, hiring a lawyer isn't necessary. Living trust computer software can help anyone create a valid and legal living trust document.
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Not Public Records
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Wills become public records as soon as they are submitted to a probate court, but living trusts never have to become public. That's because the courts are not needed to execute them.
Creditors and Living Trust Property
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If the trustee owes debt on the living trust real property, the creditor has all the rights to seek retribution against whoever owns the property. Living trusts are not public records, but ownership of real property always is. Creditors can find a way to track down the beneficiary of the real estate.
Taxes
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Most living trusts do not have any effect on federal taxes. However, there are types of living trusts that can greatly effect the estate tax exemption amounts. One such trust is a living trust for a married couple with children, which can double the exemption amount.
Wills are Still Necessary
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Most people think they do not need wills if they have living trusts. Wills cover all property not distributed in a living trust, such as property inherited shortly before death. In this situation, there may not be time to draft a new living trust to include this property. Wills ensure that all property will be distributed to the named beneficiaries and will not be left to the state to determine inheritance.
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