Living Trust: Definition, How Living Trusts Work
Living trusts, often called revocable living trusts, can help you manage your assets during and after your life.
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Writer A revocable living trust, also called a living trust, revocable trust or inter vivos trust, is a legal document in which you let a trustee manage designated assets for you and your beneficiaries during your lifetime . The trust is changeable and can provide more control than a will.
- A living trust or revocable living trust can help your estate and heirs avoid the hassle and costs of probate.
- A living trust cannot designate guardianship for minor children, so wills and living trusts are often used together as part of an estate plan.
- Living trusts are trusts established during one’s lifetime, as opposed to testamentary trusts, which are created upon one’s death .
- Technically, living trusts can be revocable or irrevocable. However, people often refer to revocable living trusts or revocable trusts simply as “living trusts.”
Pros and cons of revocable living trusts
Pros
Protects in case of incapacity.
Can save costs related to probate.
Preserves privacy.
Generally takes legal precedence over wills.
Cons
Can be more complex and costly to set up.
Does not provide estate tax benefits.
Does not protect against creditors.
Cannot designate guardianship for minor children.
Advantages of revocable living trusts
Protects in case of incapacity. The trust must be created when the person is mentally capable of agreeing to the document, or it won’t be legally binding. When the person dies or becomes incapable of handling their financial affairs, the trustee or successor trustee takes over .
Can save costs related to probate, the court-supervised process that manages the distribution of your assets when you die. Assets held in trust typically aren’t subject to probate, which can be a long, costly process.
Preserves privacy. Probate proceedings are usually public record, but assets in a living trust can avoid probate and maintain privacy .
Generally takes legal precedence over wills. Living trusts are effective once signed and funded while you’re still alive and they usually aren’t subject to probate, so they’re less likely to be contested after you die.
Disadvantages of revocable living trusts
Can be more complex and costly to set up. Depending on how complicated your estate plan is, working with financial professionals or estate planning attorneys can make living trusts more expensive than setting up a will. Transferring assets to the trust can be difficult and time-consuming.
Does not provide estate tax benefits. The grantor of a revocable living trust maintains control of the assets in the trust and can “revoke” or change the trust at any time, so they’re still subject to estate taxes on the assets. An irrevocable living trust removes control of the assets and thus can reduce tax liability .
Does not protect against creditors. Assets in a revocable living trust do not have protection from current or future creditors in the event of your death, but assets in an irrevocable living trust might.
Cannot designate guardianship for minor children. You use a will to name guardians for your children in case of your death, not a trust.
How to create a revocable living trust
1. Create a trust document
The trust document lists assets the grantor wishes to include in the trust. It also names a trustee, as well as the heirs or beneficiaries who will receive assets after the grantor dies.
2. Sign and notarize the trust agreement
The grantor must sign the trust document and have it notarized to make it official.
3. Transfer assets into the trust
The grantor should transfer assets — such as bank accounts, investment accounts and real estate — to the trust by retitling the assets in the name of the trust. You can also title limited liability companies and tangible personal property, such as jewelry, into a trust.
Revocable living trust vs. will
The main difference between a living trust and a will is when the legal agreement becomes active and what assets they concern. Living trusts are active during your lifetime once they’re signed and funded, while wills only come into play after your death.
Trusts tend to deal with specific assets rather than the sum of your personal holdings. You’ll probably still need a will if you set up a trust. A pour-over will is a common counterpart to a living trust, as it ensures that any assets not already in your trust will automatically transfer over to your living trust after you die.
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- 1. Cornell Law School. Living will. Accessed Dec 4, 2025.
- 2. Cornell Law School. Testamentary trust. Accessed Dec 4, 2025.
- 3. American Bar Association. Revocable Trusts. Accessed Dec 4, 2025.
- 4. New York State Unified Court System. Last Will and Testament. Accessed Dec 4, 2025.
- 5. Special Needs Alliance. A Short Primer on Trusts and Trust Taxation. Accessed Dec 4, 2025.
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