Much like a will, a living trust can be used to pass assets on to your spouse, your children or others after your death. Unlike a will, however, a living trust allows you to pass on your assets without going through the probate process. Probate can be prolonged, expensive and disruptive, which makes a living trust an attractive option for transferring your wealth.

What Is a Living Trust?

A living trust is essentially a legal contract in which you (as the grantor) agree to transfer some of your assets into the trust. Then, you name a trustee who is responsible for managing to assets for the benefit of the people you have selected as the trust's beneficiaries. Most people name themselves as the trustee of their living trust, though you may choose anyone you feel is up to the task of managing your assets. In such a situation, you would create a trust document that outlines the terms of the trust and instructs the trustee on how you want the assets to be managed and distributed when the time comes.

Creating a living trust is simple. You simply sign a trust agreement drafted by your attorney, and then transfer the assets to your trustee.

Why Use a Living Trust?

In addition to avoiding the probate process, a living trust offers other advantages that make it worth considering:

Flexibility and Control

Most living trusts are revocable trusts, meaning that you can alter, amend, or revoke the trust at any time. With a revocable trust, you'll still have control of the assets, and can access them at any time, if necessary.

Protection in Case of a Medical Emergency

If you were to become incapacitated for some reason, your trustee can step in to pay medical bills, cover household expenses and generally keep your financial affairs in order. If you intend to serve as your own trustee, be sure to name a successor trustee who can be counted on in an emergency. By planning ahead, you can avoid the expense and complexities of having a court-appointed conservator named in the event of your incapacity.

Coordination of Insurance and Retirement Benefits

You can arrange to have life insurance proceeds or retirement benefits put directly into your living trust at your death. Your trustee will be able to invest these funds immediately, and your beneficiaries will not face the burden of managing a large lump sum of money.


A living trust is a private contract between you and your trustee, while a will, in most states, is a public document filed in probate court and open to public scrutiny. A funded living trust can help keep your financial affairs out of the public eye. Some states, however, do require the registration of trusts if they hold certain kinds of property, such as real estate or securities.

Long-Term Trust Planning

Your trust may live on for many generations. It's important to ensure that it will be in good hands even after you're gone. While you're living, you may wish to serve as trustee, but it may be wise to consider whether or not your estate requires the kind of asset-management experience that a professional, corporate trustee can provide.

A professional trustee is obligated to prudently manage your trust's assets, and may recommend investment changes if warranted. The trustee also keeps the trust's financial records, including income and expenses, and will periodically provide you with a report of the trust's activities.

Whatever path you take, naming a successor trustee who can take the reins when the original trustee dies or is no longer able or willing to serve, is essential to long-term viability of your living trust.

What Living Trusts Won't Do

Having a living trust does not mean you don't need a will. You will still need at least a simple will to account for any assets that you either haven't or don't intend to transfer into the trust. It also won't necessarily shield you from paying taxes on the assets in the trust. While the trust is technically the owner of the assets you place in it, you, as the grantor, are still considered the owner for tax purposes.

Next: Trust Planning & Implementation

Whether a living trust is right for you depends on the size of your estate, what kind of assets you have, and what your long-term goals for yourself and your family are. If you think that a living trust might make sense for your estate plan, it's important that you fully understand all the nuances around taxes and trust planning. In the next part of our basics of estate planning series, we'll explore how you can best structure your trust to take advantage of the various tax deductions and exemptions that are available.

  • This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. ©2016 The Bank of New York Mellon Corporation. All rights reserved.