Chapter 11: Living Trusts 101
The Basics

Mary is a widow, without children or any close relatives. She is no longer able to live alone in her home or to handle her finances. In her younger days, Mary loved to hike, and wants most of her estate to support organizations that protect the environment. And she wants to leave some of her assets to her close friend, Maggie, who has been helping her as she’s become more disabled.

Mary’s lawyer advises her to transfer her property and other assets to a trustee, who will sell the home and invest the proceeds, along with the other assets, under a revocable (living) trust, to provide for Mary’s support during her lifetime. After she dies, the living trust will direct Mary’s estate to Greenpeace and the Sierra Club, and to her friend Maggie. If Mary changes her mind about who should receive her estate, Mary can make a simple amendment to the trust by a written letter or memo signed by her and delivered to the trustee.

A living trust--an inter vivos trust if you want to be formal--allows you to put your assets in a trust while you’re still alive. If your living trust is revocable, as almost all are, it gives you great flexibility. You or someone in whom you have confidence manages the property, usually for the benefit of you or your family. Most people name themselves as trustees, and find there is no difference between managing the trust and managing their own property--they have the right to buy, sell, or give property as before, though the property is in their name as trustee rather than simply in their own name.

Living trusts have become extremely popular in recent years. But even though they can be a useful, simple, and relatively inexpensive way to plan your estate, they do not magically solve all your problems. And though they’re great for some people, you can’t assume they’re great for you.

Deciding whether a living trust is right for you depends on the size of your estate, what kinds of assets it contains, and what plans you have for yourself and your family.