What Is a Living Trust and How to Make One

A living trust is a legal document that lets you name beneficiaries for your property while keeping your estate out of probate court. You put property into the trust, naming yourself as the initial trustee, so you retain control during your lifetime.

After you die, the person you name as successor trustee takes over and transfers the trust assets to your beneficiaries according to the trust’s instructions. Unlike a will, a properly executed and funded living trust allows your estate to avoid the costs, delays, and privacy concerns of probate proceedings.

How Does a Living Trust Work?

A living trust begins when you (the “grantor”) draft and sign a trust document to:

• set out the trust’s terms
• name yourself as the initial trustee
• appoint a successor trustee, and
• identify your beneficiaries.

After establishing the trust, you transfer ownership of assets into it, a process called funding. As trustee, you continue to manage these assets as you wish, with the flexibility to change or revoke the trust while you are able.

If you become incapacitated, your chosen successor steps in to manage the trust property, avoiding the need for court intervention. When you die, the successor trustee settles any debts or expenses and then distributes the assets to your beneficiaries as you directed.

You must make sure your assets are owned by the trust. Property you fail to transfer into the trust won’t avoid probate, resulting in delays, extra costs, and a loss of privacy for your beneficiaries.

Why Do You Need a Living Trust?

A living trust is the most effective way to spare your family the delays and steep costs of probate court. Unlike a will, which requires court oversight and public filings, a properly funded trust gives your loved ones immediate access to your assets and shields your estate from unnecessary legal expenses.

Privacy is another advantage of a living trust. Because the trust operates outside the court system, your financial affairs and your beneficiaries’ inheritances won’t be available to the public. Only those who are directly involved will see the details.

That said, not everyone needs a living trust. If your estate is small, your primary assets are held jointly, or your state offers simplified probate procedures that will cover most of your property, a traditional will might be all you need. In these situations, the cost and effort of creating a trust might outweigh the benefits.

Types of Living Trusts: Revocable vs. Irrevocable

Most people who talk about a "living trust" mean a revocable one. But if you're exploring your estate planning options, it helps to know the difference between revocable and irrevocable trusts. Each is a tool for managing and transferring assets, but they provide distinct features and levels of control.

Revocable living trust. A revocable trust lets you retain full control over your assets during your lifetime. You can change the trust’s terms, add or remove assets, or even dissolve the trust entirely if your circumstances change. This flexibility makes revocable trusts a popular choice.

Irrevocable living trust. An irrevocable trust is usually permanent once you set it up. After you transfer property into an irrevocable trust, you typically can’t change the terms or reclaim those assets. While this means giving up control, irrevocable trusts can offer benefits such as protection from creditors and potential estate tax advantages.

Key Living Trust Roles: Grantor, Trustee, and Beneficiary

The cast of characters in a living trust includes three key roles: the grantor, the trustee, and the beneficiary. Knowing each role will help you see how the trust operates and which parts you will play.

The Grantor

The grantor is the person who sets up the living trust. They put their own property into the trust’s name. If you’re creating a trust for your estate plan, you’re the grantor, and you decide which assets to include. You might find it helpful to spend a few moments learning more about a grantor’s role and responsibilities.

The Trustee

The trustee manages the living trust’s assets. Most people name themselves as the initial trustee of their own revocable living trust. If you do that, you’ll keep full control of your accounts and property while you’re able. You’ll also choose a successor trustee, someone you trust to step in and handle your affairs if you become unable to do so or after you pass away.

The Beneficiary

Beneficiaries are the people or organizations who will ultimately receive the trust’s property. While you’re alive and acting as trustee, you’re often the primary beneficiary. After you’re gone, your chosen beneficiaries inherit what’s in the trust, following your instructions.

One valuable feature of a living trust is the option to establish an ongoing subtrust for a minor beneficiary. This allows you to set aside protected assets for a young person, with distributions managed by the trustee until the beneficiary reaches an age you specify.

Living Trust Assets: What Should You Include and Exclude?

When deciding what to place in your living trust, focus on high-value assets that would otherwise go through probate, including your home, vacation or rental properties, substantial bank and investment accounts, and unusually valuable personal property. These assets will benefit most from the trust's power to streamline transfers and avoid court involvement. You can also include business interests and even intellectual property.

On the other hand, some assets are best left out of your living trust. Retirement accounts like IRAs and 401(k)s, for example, should not be retitled in the name of your trust. Instead, you can name a beneficiary directly on a form from your financial institution. (Your living trust can be that beneficiary, if appropriate.) Life insurance policies, vehicles, and everyday household items generally don’t need to be included, and assets with joint ownership or designated beneficiaries (such as payable-on-death accounts) already transfer outside probate, so you can skip them, too.

To learn more, see our detailed discussion on the types of property you should include or leave out of your living trust.

How to Create a Living Trust

Creating a living trust includes several important steps:

1. Decide on the type of trust. Determine whether you need an individual trust or a shared trust with your spouse or partner.
2. Take stock of your assets. Identify which property and accounts you want the trust to cover.
3. Choose your key people. Select your beneficiaries and appoint a successor trustee to oversee the trust when you can no longer do so.
4. Draft the trust document. Prepare the legal paperwork that spells out your wishes and names everyone involved.
5. Sign and notarize. Make the trust official by signing it in front of a notary public.
6. Transfer your assets. Move the selected property into the trust’s name. Remember: This step is essential to activate the trust’s benefits.

For a more detailed walkthrough and tips on handling unique situations, see our step-by-step guide to setting up a living trust.

How Much Does It Cost to Make a Living Trust?

There is no one price for a living trust. The cost varies widely, depending on your situation, the level of assistance you need, and even where you live. If you work with an experienced estate planning attorney in a large metropolitan area, expect to pay several thousand dollars for a straightforward trust. For larger estates, fees can climb above $5,000. In smaller towns or in regions with a lower cost of living, lawyers’ fees will probably also be lower.

If you’re comfortable handling paperwork on your own, online estate planning tools are a more affordable option, ranging from about $400 to $1,000. This do-it-yourself route can work well for simple situations, but it does come with risks. Mistakes could cause problems down the line. If you make your own trust, you might be able to hire a lawyer to review your work and still save some money.

While these costs might seem significant compared to a basic will, it’s important to keep the big picture in mind. Remember that a well-drafted living trust will help your family avoid a drawn-out, expensive probate process. Ultimately, the money you spend up front could save your loved ones far more in time, stress, and legal fees later on.

Should You Have Both a Will and a Living Trust?

While a living trust is a powerful tool for avoiding probate and managing your assets, it doesn’t replace the need for a will. Only a will can appoint guardians for minor children, name an executor for your estate, and spell out your wishes for personal items or property not covered by your trust.

If you create a living trust but neglect to make a will, any property that isn’t transferred into your trust could be distributed according to your state’s intestacy laws, resulting in outcomes you never intended. Simply put, your trust can manage most of your assets, but a will is a crucial backup that addresses anything left out and ensures your wishes are fully honored.

To learn more, see our detailed comparison of wills and trusts, including guidance on why having both is often the best approach.

Amending or Revoking a Living Trust

A revocable living trust is designed to be flexible, allowing you to change it or even dissolve it completely if your circumstances change significantly. As the grantor, you can change your trust with a formal written amendment for minor changes, or you can create what’s called a “restatement” for more substantial revisions. Usually, only the grantors can change a trust. And if the trust is irrevocable, it can’t be amended or revoked, except in rare circumstances, such as court-ordered changes if a judge finds the original terms unworkable.

If you want to revoke your living trust, you’ll need to take extra steps, including drafting a revocation document and transferring ownership of property out of the trust. These additional tasks often make it preferable to amend or restate the trust unless you have no choice but to dissolve it.

Our in-depth article on how to amend or revoke your living trust can help you decide which path to take.

Learn More About Making a Living Trust

A living trust is a great way to protect your assets, streamline the inheritance process by avoiding probate, and ensure your wishes are carried out. You can find out about making WillMaker’s living trust in WillMaker’s Legal Manual.