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Living Trust: A Comprehensive Guide for Estate Planning

What a living trust does everywhere, and the handful of rules, from execution formalities to spousal rights to estate tax, that change once you cross a state line.

Find out where you stand — what state are you in?

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Introduction

A living trust is a legal arrangement in which you transfer ownership of your assets to a trustee, usually yourself, while you are alive, so a successor trustee can manage and distribute them after your death without going through probate court. That description comes with a condition that matters more than any other: a living trust avoids probate only for the assets you actually retitle into it. A bank account, a car, or a house still held in your own name at death is not covered by the trust and goes through probate under your state's rules regardless of what the trust document says. Past that shared core, living trust law is set almost entirely at the state level, and it does not read the same from state to state. Whether a signature alone is enough to create a valid trust, whether a surviving spouse can reach trust assets, whether the state taxes what you leave behind, and how long a trust is allowed to run before it must end are all questions your state answers differently than most others answer them. This page covers what holds true nationally; the state pages linked below cover what changes.

Key Things to Know

  1. 1

    Creating a living trust is simple almost everywhere, but not everywhere. Across a broad sample of states, the large majority ask for nothing more than a signed writing that shows your intent to create the trust; no notary, no witnesses, no will-style formality. A small number of states depart from that and require more: one requires the trust's death-time terms to be signed with the same formalities as a will, one requires a witness, and one requires either notarization or two witnesses. Where your state falls on this changes what actually makes your trust valid.

  2. 2

    Probate avoidance is a function of funding, not of signing the trust document. The trust itself does nothing for an asset that was never retitled into the trustee's name. This is true in every state and is the single most common reason a living trust fails to work the way its settlor expected.

  3. 3

    A revocable living trust gives you no protection from your own creditors while you are alive, and it does not reduce your estate tax exposure while you are alive, in any state. You can still revoke the trust and reach its assets, so your creditors and the taxing authority can reach them too. Roughly a third of states allow a different structure entirely, a self-settled asset protection trust, but that is a distinct, typically irrevocable arrangement with its own rules, not a feature of an ordinary revocable living trust.

  4. 4

    A surviving spouse's elective share reaches assets held in a revocable trust in a majority, but not all, of the states surveyed. In some states a living trust cannot be used to disinherit a spouse; in others the elective share statute does not reach the trust at all, or reaches it only in limited circumstances. This is one of the largest single differences between states and is worth checking before you assume a trust changes what your spouse can claim.

  5. 5

    Whether your estate pays a state-level death tax also depends entirely on where you live. A minority of states levy their own estate tax, a smaller number levy an inheritance tax, and one state levies both. Most states levy neither. A revocable living trust does not avoid a state estate or inheritance tax on its own, because the assets you can still revoke and control remain part of your taxable estate.

  6. 6

    How long a trust is allowed to last, its perpetuities period, ranges widely by state. Some states still apply the traditional common-law rule against perpetuities; others have extended it by statute to a fixed term of years; a few allow trusts to run for centuries, and a couple allow a trust to continue perpetually with no end date at all. This mainly affects what a trust can do for grandchildren and later generations, not the revocable trust you sign for yourself.

  7. 7

    Almost no state requires you to register a living trust with a court or a state agency just because you created one. Registration requirements exist in only a small handful of states, and even there they are narrow. In the large majority of states, an ordinary living trust is never filed anywhere while you are alive; it only becomes visible to a court, if at all, after your death, and even then usually only to confirm the trustee's authority.

Key Decisions

Single individuals without children

High net worth individuals

Married individuals with children

Living Trust Requirements

  • Grantor/Settlor Information

    Full legal name, address, contact information, marital status, and citizenship status of the person(s) creating the trust.

  • Family Information

    Names and relationships of spouse, children, and other potential beneficiaries, including birth dates and contact information.

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Frequently Asked Questions