Living trusts

Living trusts — quick definition

Living trust (also called a revocable living trust when it can be changed) is a legal arrangement created during a person’s lifetime in which the grantor transfers ownership of assets—such as a home, bank accounts, and investments—into the trust. The trust holds and manages those assets for the grantor’s benefit while they’re alive and specifies how assets will be distributed to named beneficiaries after death. Because properly funded assets in a living trust generally avoid probate, distribution can be faster, private, and less costly than using a will alone.

How a living trust works in real estate

• Grantor: the person who creates the trust and transfers property into it (often the homeowner).
• Initial trustee: usually the grantor, who continues to control and use the property while alive.
• Successor trustee: a person or institution named to manage or distribute trust assets if the grantor becomes incapacitated or dies.
• Beneficiaries: the people or entities who will receive the property according to the trust’s terms.

To put real estate into a living trust, the grantor executes a deed that transfers title from the grantor personally to the trustee of the trust. The grantor typically remains in full control as trustee, so daily use and mortgage responsibilities continue unchanged. After the grantor’s death (or incapacity), the successor trustee steps in to manage or transfer the property per the trust instructions—often without court supervision.

Main benefits in real estate

• Probate avoidance: Funded trust assets generally pass to beneficiaries without probate, reducing delay and court costs.
• Privacy: Trust transfers are private; probate proceedings are public records.
• Incapacity planning: A successor trustee can manage the property immediately if the grantor becomes incapacitated—no guardianship or conservatorship required.
• Control during life: Grantors who serve as trustees keep full control over real estate while alive and may change trust terms if it’s revocable.
• Smoother administration: Successor trustees can sell or manage property efficiently for the benefit of beneficiaries.

Practical examples

• Family estate planning: A couple funds a revocable living trust with their primary residence and investment accounts, names themselves as co-trustees and their children as beneficiaries. They avoid probate for those assets and set specific bequests (for example, gifting a classic car to one child).
• Incapacity protection: An individual appoints a successor trustee so their house can be managed or sold to pay care costs if they become incapacitated, without court involvement.
• DIY vs. attorney: Some people use online forms to create a living trust and retitle property themselves. Because real estate transfers can be complex, many still consult an estate planning attorney to avoid mistakes that could cause probate or tax issues later.

Key things to keep in mind

• Funding is essential: A trust only protects assets that are actually retitled into it. Newly acquired property or accounts left in your personal name may still go through probate unless you retitle them or otherwise provide beneficiary designations.
• Costs and upkeep: Setting up a trust usually costs more than drafting a simple will, and you must actively retitle assets and update the trust when necessary.
• Not always necessary: For small estates or where probate is simple and inexpensive, a living trust may offer limited advantage.
• Taxes: A revocable living trust normally doesn’t change income or estate tax treatment while the grantor is alive. Complex tax planning may require additional structures or advice.

Typical steps to create a living trust for real estate

1. Decide whether you want a revocable (changeable) or irrevocable (generally not changeable) trust.
2. Draft the trust document specifying trustees, successor trustees, and beneficiaries.
3. Execute the trust document according to state law.
4. Retitle the real estate into the trust by executing and recording a deed transferring title from you to the trustee of the trust.
5. Update insurance, mortgage notifications (if required), and beneficiary designations as appropriate.
6. Keep an inventory of trust assets and retitle new assets into the trust to maintain its effectiveness.

Common pitfalls

• Failing to retitle property or update the trust after acquiring new assets, which can leave those assets subject to probate.
• Using incorrect deed language or not recording the deed properly, which can cause title problems.
• Not naming clear successor trustees or backup trustees, creating administrative delays.
• Assuming a trust eliminates all taxes or creditor claims—trusts provide estate administration benefits but are not a universal shield.

Bottom line

A living trust in real estate is a practical estate-planning tool that lets you keep control of your home and other property during life, appoint someone to manage assets if you become incapacitated, and transfer real estate privately and often more quickly than through probate. It’s most effective when you properly fund the trust (retitle property) and name reliable successor trustees. For complex situations or large estates, consult an estate planning attorney to avoid costly mistakes.