
What Is a Living Trust?
Quick Answer
A living trust is a legal arrangement that protects your assets while you’re alive and helps you distribute assets and avoid probate when you die. Though establishing a trust is more expensive and complicated than writing a simple will, it may have benefits that are worthwhile even if your net worth isn’t in the billions.

A living trust is a legal arrangement used to protect your assets while you're alive and determine how they're distributed after your death. A living trust covers some of the same ground as a will, but it's designed to help your heirs avoid probate, and to designate someone to help if you're ever unable to manage your own finances.
You don't have to be a billionaire to benefit from a living trust; they're also for everyday people who want greater stewardship over their assets and their estates. Here's what you need to know about choosing and establishing a living trust.
What Is a Living Trust?
A living trust is an estate planning tool used to hold your assets while you are alive and provide for distributing assets after your death. The provisions of a living trust are outlined in trust documents, which spell out who is creating the trust, who manages the assets and who inherits assets upon death. A living trust can also name a successor trustee who can step in and manage finances if the trust's creator is no longer able to do so.
Many people establish a living trust to avoid a lengthy and expensive probate process, and to designate a person to handle their finances in case of illness or incapacity. Some living trusts have other potential benefits as well, including the ability to shield assets from estate taxes or creditors.
Tip: Probate typically costs 3% to 7% of your estate's value.
Learn more: How to Avoid Probate
How Does a Living Trust Work?
A living trust establishes a framework for holding and distributing assets. There are three main parties in a living trust:
- The grantor, settlor or trustor creates the living trust.
- The trustee manages the trust.
- The beneficiaries receive income or distributions from the trust.
A single person (most often you) can play multiple roles. For example, you may act as the grantor who establishes the trust and the trustee who manages it. The grantor typically names a successor trustee as well. The successor trustee could be your adult child, relative, financial advisor or other third party who will manage the trust after you die or become incapacitated. A successor trustee doesn't determine how assets are allocated. Their role is to carry out your wishes outlined in the trust.
Types of Living Trusts
There are two main types of living trusts, revocable and irrevocable. Here's an overview of how they work.
Revocable Trusts | Irrevocable Trusts | |
---|---|---|
Do they streamline the probate process? | Yes | Yes |
Is asset distribution kept private? | Yes | Yes |
Is it easy to modify? | Yes | No |
Can the grantor be a trustee? | Yes | Yes, but it isn't recommended |
Can it help you qualify for government benefits? | No | Yes |
Are assets shielded from creditors? | No | Typically, yes |
Can it help reduce estate taxes? | No | Yes |
Revocable Trust
A revocable trust can be revoked or amended at any time. You can change trustees or beneficiaries; you can even terminate the trust and convert title on your properties back to your name. With a revocable trust, the grantor can retain full control of their assets while they are alive and able. They can also name a successor trustee to take over control of their financial affairs if they become incapacitated.
Revocable trusts are the most common type of living trust. They offer flexibility while still protecting grantors and their heirs from financial problems or conservatorship in the case of illness or incapacity, and from probate after they pass. You still pay taxes on income from a revocable trust.
Irrevocable Trust
An irrevocable trust can't be revoked or amended, except in narrow circumstances. When you establish an irrevocable trust, you give up ownership rights to the assets in the trust and cannot reverse your decision.
Irrevocable trusts do offer a few advantages that revocable trusts don't. Some people use irrevocable trusts to avoid estate taxes. Since the assets in an irrevocable trust are no longer yours, they may not be subject to estate taxes—though, of course, consult an estate planning attorney to fully understand your options. Also bear in mind that estate taxes only apply to estates totaling more than $13.99 million in assets (in 2025), so this benefit may not apply to you. An irrevocable trust may also protect your estate from creditors and may help you qualify for government benefits like Medicaid.
How Much Does a Living Trust Cost?
The cost of establishing a living trust starts at around $400 for a do-it-yourself online trust. Online trust services, such as LegalZoom and Trust & Will, ask a series of questions and prepare trust documents based on your answers. You may also get limited access to legal advice.
If you choose to work with an attorney, a simple living trust may cost somewhere between $1,500 and $4,000 or more, depending on your location and the complexity of your assets and trust. Once your trust documents are complete, you may incur additional costs transferring ownership to your trust. For example, you may pay title transfer fees to change ownership of your home into the name of your trust.
Learn more: Do You Need an Estate Planning Attorney?
What to Put in a Living Trust
Most of your valuable assets can go into your living trust. Property that's commonly held in a trust includes:
- Real estate
- Stocks, bonds, mutual funds and other investments
- Savings accounts, CDs and money market accounts
- Safe deposit boxes
- Life insurance policies
- Annuities
- Art, collectibles and other valuable property
- Business interests
Learn more: How to Put Your House in a Trust
Tip: Ownership of any items placed in your trust must be transferred to the trust in order for it to be effective. Any assets that aren't transferred to your trust will be subject to probate. You can create a pour-over will to transfer remaining assets into your trust upon your death, though this may not completely eliminate the need for probate.
What Should You Leave Out of Your Trust?
Some assets aren't commonly placed into a trust. These include:
- Retirement accounts: Changing ownership might count as a taxable withdrawal, so many people leave their tax-advantaged retirement accounts as is.
- Health savings and medical savings: These tax-advantaged accounts often can't be transferred to a trust either. Check with your financial institution or tax advisor for more information.
- Checking accounts: Managing an active checking account from a trust can be complicated unless you have full control of your assets as a trustee. Consider asking for a pay-on-death form so you can name a beneficiary on your checking account instead.
- Vehicles: Vehicles are often left out of living trusts. Your car, truck, motorcycle, recreational vehicle or boat may not need to be transferred to a trust because vehicles often aren't subject to probate. Check with your state's laws or your attorney to learn more about probate rules in your state.
Living Trust vs. Will
Living trusts and wills are both legal documents that designate the beneficiaries of your estate after you die. But wills and trusts are different in both their purpose and scope. Here's a comparison showing some of the key differences between trusts and wills.
Will | Living Trust |
---|---|
Designates beneficiaries of your estate | Designates beneficiaries of your estate |
Takes effect after you die | Takes effect while you are alive |
Filed with probate court, becomes public record after you pass | Remains private |
Managed by an executor | Managed by a trustee |
Goes through probate process | Avoids probate |
No provisions for illness or incapacity | Names trustee to step in if you are ill or incapacitated |
Can name a guardian for your minor child or children | No provisions for naming guardians |
No legal or financial impact while you are living | May shield money from creditors or estate taxes |
If you have only a few assets and a simple estate, a will may be adequate. An estate planning attorney can help you draft one, or you can use an online service to draft one yourself. In a pinch, having a basic will may be better than having no estate plan at all.
Many people who establish living trusts also have wills to cover items that aren't included in a trust, such as naming guardians for their minor children. A "pour-over" will might be used to transfer any assets that aren't part of the living trust to the trust when you die, streamlining the probate process.
Learn more: How to Create an Estate Plan
Benefits and Drawbacks of a Living Trust
Establishing a living trust has pros and cons. In many cases, the major drawbacks are cost and effort, versus the benefits of passing more of your wealth to your heirs (instead of paying for probate) and providing for your finances in the event you're unable to manage them yourself. Here's more detail:
Benefits
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Avoiding probate: Bypassing probate makes the distribution of assets more efficient and less costly than having a will alone—or, worse, failing to have an estate plan at all.
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Greater control: Unlike a will, a living trust allows you to stipulate not just how much your heirs will receive, but when and how they'll receive their inheritance. For example, you can have a certain amount of money released each year or held in trust until your heirs reach a certain age.
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Privacy: During the probate process, your will becomes a public document. A living trust remains private, before and after your death.
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Peace of mind: A living trust lets you name a successor trustee who will manage your assets in the event you become incapacitated. This helps you avoid having a court appoint someone to handle your affairs through conservatorship.
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Protection: In some cases, you can use an irrevocable living trust to protect money you owe to creditors, since the property in an irrevocable trust is no longer legally yours.
Drawbacks
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Costs: Depending on your location, it could cost thousands of dollars to have an estate planning attorney draft, maintain and update your living trust. Drafting a will costs significantly less; you can even draw up a will yourself if you can't afford the fee.
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Inflexibility: Some financial maneuvers may be difficult while your assets are in a trust. For instance, you may need to move your property out of your trust before borrowing against your home.
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Retitling assets: Retitling your assets to place them into your trust can be both time-consuming and costly, but you must transfer ownership for the trust to be effective.
Do You Need a Living Trust?
You may want to establish a living trust even if you don't have a large estate or complicated assets. Here are six reasons to consider a living trust:
- You want to simplify the inheritance process and avoid probate.
- You want your estate plans to remain private.
- You want a designated trustee to manage your finances if you're incapacitated.
- You want to provide for a minor child or disabled beneficiary.
- You have assets in different states or countries, which can complicate probate.
- You want to protect your assets in a remarriage or divorce by holding them separately in an irrevocable trust.
How to Set Up a Living Trust
- Choose a revocable or irrevocable trust. Ask your attorney for advice if you aren't sure which one is best for you.
- List the assets you want to put in the trust. Your assets might include real estate (including your home), financial accounts, life insurance, personal property or any interests you may have in a business.
- Name your beneficiaries. Also decide how assets will be divided: equally between all beneficiaries or as individually specified.
- Identify a current and successor trustee(s). The current trustee might be you or your spouse; the successor trustee could be an adult child, attorney, financial advisor or trusted friend or relative.
- Designate a money manager if needed. If one of your beneficiaries is a minor child, you may want to name a manager to handle their assets until they reach the age of majority or a designated age of your choice.
- Prepare the trust. Prepare the trust documents with online help or with the help of your estate planning attorney.
- Transfer property ownership to the trust. Your trust is only effective when you transfer assets into it. You typically don't transfer retirement funds, health savings accounts, flexible spending accounts and your primary checking account into a trust. Most other valuable assets should be transferred.
- Update the trust as necessary, such as after major life events. You may want to update your choice of trustee(s) or beneficiaries when you have a child, get married or divorced, or lose a loved one, for example.
The Bottom Line
Though a living trust may not be necessary in every case, creating one is a manageable—and potentially valuable—step to consider in your estate planning, even if your estate is relatively modest. A living trust can help you handle your finances while you're alive and protect your heirs from probate after you're gone. Although a living trust may be more expensive to establish than drafting a simple will, you and your heirs may save more in the long run by avoiding conservatorship and probate costs down the road.
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About the author
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
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