A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. A living trust is a trust created during a person’s lifetime to either save money on taxes or set up long term property management.
In the United States, a living trust refers to a trust that may be revocable by the trust creator. Living trusts allow assets to be passed to heirs without going through the process of probate. Avoiding probate will normally save substantial costs (the probate courts, in some states, charge a fee based on a percentage net worth of the deceased), time, and maintain privacy (the probate records are available to the public, while distribution through a trust is private). Both living trusts and wills can also be used to plan for unforeseen circumstances such as incapacity or disability, by giving discretionary powers to the trustee or executor of the will.
Different kinds of living trusts can help you avoid probate, reduce estate taxes, or set up long-term property management.