Is a Living Trust Good in All States?

By Laura Payet

Is a Living Trust Good in All States?

By Laura Payet

A living trust is an estate planning tool primarily used to allow a person to distribute property to named beneficiaries after passing away without having to go through the probate process. All states recognize living trusts as legally valid if they meet the requirements of the state in which they are created. A living trust offers certain advantages over a will for disposing of property, but a living trust should supplement, not replace, a will as part of a comprehensive estate plan.

Elderly couple sitting on a couch looking at a laptop together

Living Trust vs. Will

A trust is a legal arrangement in which one person, called a trustee, manages property for the benefit of another, called a beneficiary. The person who creates a trust is called the grantor. In a living trust, the grantor transfers title to her property to the trust to be managed by the trustee, who the grantor usually designates as herself during her lifetime. She is, therefore, able to continue to use and enjoy her property while she is still alive just as she would if she retained legal title to it. Upon her passing, her appointed successor trustee takes over to transfer the trust property to the beneficiaries according to the trust document without going through probate, which is the legal process through which an estate's property is distributed and debts are settled according to a will.

A will is a legal document in which a person, called the testator, specifies his wishes for how his property should be disposed of after he passes away. The testator can also use his will to designate a guardian to care for his children if he should pass away before they reach adulthood. A will has no legal effect until after the grantor's death. In most cases, a will must be submitted to the probate court for authentication and administration before its provisions can be carried out. The probate process can take anywhere from a few months to years to complete.

Living Trust Advantages

A living trust offers many advantages, including:

  • As long as the trust is revocable, the grantor can change or revoke it at any time during her lifetime.
  • A trust, unlike a will, avoids probate, which allows property to be distributed to the beneficiaries faster than with a will.
  • Because a trust avoids probate, it is cheaper than a will to administer after the grantor's passing.
  • A living trust can have tax advantages because property transferred to the trust is not considered part of the grantor's estate for federal or state estate tax purposes.
  • Unlike a will, which becomes public at the testator's death because of the probate process, a trust can remain private.

Living Trust Disadvantages

There are also certain disadvantages that accompany a living trust. A living trust can cost more than a will to create and it requires more work on the grantor's part to complete properly. When the grantor creates a living trust, she must go through the process of transferring title of the trust property to the trust. This can require changing deeds, bank records, automobile titles, insurance company records, and investment company records.

Even with a living trust, the grantor should still prepare a will. First, if the grantor has minor children, in most states she cannot use a living trust to designate a guardian. Second, a will is needed to capture any property that might not have been added to the living trust, by design or oversight, so that property does not pass through state intestacy laws, the laws defining how assets pass when the deceased did not have a will. In some states, this is known as a pour-over will.

Whether you choose a living trust or opt for a will alone, a comprehensive estate plan is important to be sure your loved ones are provided for in the future. Estate planning does not have to be expensive—consult an online service provider for help today.
