A trust is an arrangement under which one person, called the trustee, holds legal title to property on behalf of another. You can be the trustee of your own living trust, keeping full control over all property held in trust.
There are many kinds of trusts. A "living trust" (also called an "inter vivos" trust) is simply a trust you create while you're alive, rather than one that is created at your death under the terms of your will.
All living trusts are designed to avoid probate. Some also help you save on death taxes, and others let you set up long-term property management.
Why do I need a living trust?
If you don't take steps to avoid probate, after your death your property will probably have to detour through probate court before it reaches the people you want to inherit it. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it.
The average probate drags on for months before the inheritors get anything. And by that time, there's less for them to get: In many cases, about 5% of the property has been eaten up by lawyer and court fees. The exact amount depends on state law and the rates of the lawyer hired by the executor.
How does a living trust avoid probate?
Property held in a living trust before your death doesn't go through probate. The successor trustee-the person you appointed to handle the trust after your death -simply transfers ownership to the beneficiaries you named in the trust. In many cases, the whole process takes only a few weeks, and there are no lawyer or court fees to pay. When the property has all been transferred to the beneficiaries, the living trust ceases to exist.
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