A living trust–an inter vivos trust if you want to be formal–allows you to put your assets in a trust while you’re still alive. If your living trust is revocable, as almost all are, it gives you great flexibility. You or someone in whom you have confidence manages the property, usually for the benefit of you or your family. Most people name themselves as Trustees, and find there is no difference between managing the trust and managing their own property–they have the right to buy, sell, or give property as before, though the property is in the trust’s name rather than their own.
A living trust is one of the two main ways to avoid probate. (The other is joint tenancy or survivorship if allowed in your state.) One of the purposes of probate is to determine the disposition of the property you leave at death. Since the Trustee of your living trust owns that property, there is no need for probate. Living trusts have become extremely popular in recent years. Even though they’re a useful, simple, and relatively inexpensive way to plan your estate, they do not magically solve all your problems.
A trust is created by a Trustor or Settlor who transfers some or all of his property to a Trustee who holds that trust property (or trust corpus) for the benefit of the beneficiaries. In the case of the self-declared trust, the Trustor or Settlor and Trustee are the same person. The Trustee has legal title to the trust property, but the beneficiaries have equitable title to the trust property (separation of control and ownership). The Trustee owes a fiduciary duty to the beneficiaries, who are the “beneficial” owners of the trust property. (Note: A Trustee may be either a natural person, or an artificial person (such as a company or a public body), and there may be a single Trustee or multiple co-Trustees. There may be a single beneficiary or multiple beneficiaries. The Trustor or Settlor may himself be a beneficiary.)
Deciding whether a living trust is right for you depends on the size of your estate, what kinds of assets it contains, and what plans you have for yourself and your family.