What is a living trust agreement as opposed to a "standard" will?

Question

What is a living trust agreement as opposed to a "standard" will?

Answer 1

A will is a document that lists a person's assets (estate) and who they go to upon the person's death. This can be contested in court and can end up in probate, where probate fees, attorney's fees, and probate taxes can eat up a substantial chunk of the estate.

A living trust is where all of a person's or couple's assets are held by the trust. That is, the deed to their property is not in their name. It's in the name of the trust.

Within the trust are lots of instructions as to what happens to the assets within the trust upon the death of one or more of the persons named in the trust. And, since the trust cannot die (it's kind of like a corporation), there is no probate involved. The assets just get dispersed in accordance with the instructions in the trust.

The trust also names primary and secondary trustees. These are the people who will administer the trust (follow the instructions) upon the death of one or more persons named in the trust.

My wife and I have a living trust, where all of our assets (primary residence, investment properties, 401k's, bank accounts, stock accounts, etc.) are listed. Also, all of our insurance policies have named the trust as the beneficiary. If I die, my wife is named as the trustee. If she dies, I am named as the trustee. And, we have both figured out exactly how all of our assets will be dispersed to our heirs should one or the other - or both of us - die.

If we both die, her brother is the primary trustee and my mother is the secondary. Since we have described in detail how our assets get dispersed upon our deaths, the trustees will know exactly how to distribute our assets to our survivors.

A living trust is fairly inexpensive (about $1500 on average) and it makes things extremely simple for your survivors when you die. Otherwise, when you die, things come out of the woodwork (insurance payoffs or other assets that weren't listed in a will or whatever pop up out of nowhere). And, it's then up to the probate court to figure it all out. With a living trust, you figure all that out beforehand. And, someone you know and trust (the trustee) disperses the assets, not the courts.