How a Living Trust Works

A basic revocable living trust—like the one you can make with Nolo's Living Trust—does essentially what a will does: leaves your property to the people you want to inherit it. But because a trustee owns your property, your assets don't have to go through probate at your death.

While Alive, You Retain Control

When you create a revocable living trust, you appoint yourself trustee, with full power to manage trust property. Then you transfer ownership of some or all of your property to yourself as trustee. You keep absolute control over the property held in trust. You can:

  • sell, mortgage or give away property held in trust
  • put ownership of trust property back in your own name
  • add property to the trust
  • change the beneficiaries
  • name a different successor trustee, or
  • revoke the trust completely.

EXAMPLE: Ashley creates a revocable living trust and names herself as trustee. She transfers her valuable property -- a house and some stocks -- to herself as trustee. As trustee, she can sell, mortgage or give away the trust property, or take it out of the trust and put it back into her name.

After You Die, The Trustee Takes Over

After you die, the person you named in your trust document to be successor trustee takes over. This person transfers the trust property to the relatives, friends or charities you named as the trust beneficiaries. No probate is necessary for property that was held in trust. In most cases, the whole thing can be handled within a few weeks. When the property has all been transferred to the beneficiaries, the living trust ceases to exist.

If any of your beneficiaries inherit trust property while still young (not yet 35), the successor trustee (or the surviving grantor, if you made a trust with someone) has more responsibilities. The successor trustee will follow the instructions you left in the trust document, and either:

  • transfer the property inherited by the child to the "custodian" you chose, to manage the property until the child reaches an age specified by your state's law (21 in most states, but up to 25 in a few states), or
  • keep the property in a "child's subtrust," using it for the child's benefit, until the child reaches an age you designate.

EXAMPLE: Lenora sets up a basic revocable living trust to avoid probate. In the trust document, she makes herself the trustee and appoints her son Ben as successor trustee, to take over as trustee after her death. She transfers her valuable property -- her house, savings accounts and stocks -- to the living trust.

The trust document states that Lenora's grandson, Max, is to receive the stocks when she dies. She provides that if Max is not yet 27 when she dies, the stocks will stay in a "child's subtrust," managed by the successor trustee Ben. Everything else goes to her son Ben.

When Lenora dies, Ben becomes trustee. He follows the terms of the trust document and, in his capacity as trustee, distributes all the trust property -- except the stocks -- to himself, without probate.

Ben also manages the stocks inherited by Max, who is 16 at Lenora's death, until his 27th birthday. When all the property in the subtrust is given to Max or spent on his behalf, the subtrust ends.