Living trusts are traditionally thought of as tools for the very wealthy. However, living trusts have advantages that can be useful to other individuals, such as those who have children with special needs. Even if your net worth doesn't qualify you as affluent, you may be able to benefit from a living trust.
A living trust is a document that an attorney creates and that you as trustor (also known as grantor or settlor) sign, transferring your assets out of your name as an individual and into the name of the trust. You, as trustor, choose the trustee -- the individual or corporation that will manage your trust assets and adhere to all the directions of the trust document. Whomever you choose to benefit from your assets once you have passed away is called the trust beneficiary or beneficiaries.
Living trusts aren't advantageous or necessary for everyone. There are certain uses for a living trust that make having one worthwhile. A living trust is usually revocable, meaning that you as trustor can change or even close your trust. If you become incapacitated and are no longer able to handle your financial affairs, your trustee takes over managing your trust on your behalf. If you have a child with special needs, or one who handles money poorly, a living trust provides a way to control how and when your assets are distributed after your death.
Some advantages of a living trust, such as estate tax savings, are more beneficial to those individuals who have a high net worth, generally accepted as $1 million or more in liquid assets (not including real estate, business, valuable collections or other assets not easily converted to cash). Other living trust characteristics can be advantageous to anyone. Examples of these advantages are avoiding probate court delays, providing for minor children, controlling assets after death and maintaining privacy.
Your individual net worth is a consideration for a living trust primarily if you wish to employ a corporate trustee. Corporate trustees, such as banks, trust companies or investment firms, have a minimum balance before they will agree to serve as trustee. Some corporate trustees offer "small" trust products that limit the types of investments that can be held and the class of beneficiary you choose, such as your estate or a single beneficiary. The required minimum balance (usually $100,000) is determined based on the liquid assets in your estate rather than your net worth. If you are planning on naming an individual as the trustee, your net worth may not have to be as significant.
The best method to use to determine the minimum net worth you should have to benefit from a living trust is to check your state's "small estate" laws. Each state determines the net worth that can pass to your beneficiaries by means of an affidavit versus being handled by the probate courts. Small-estate laws vary from state to state. As of 2011, in Washington state the small estate maximum amount is $100,000, while in Washington, D.C., it is $40,000.