When to Make a Living Trust

What is a living trust?

A living trust is a legal document that transfers ownership of your assets into the trust's name during your lifetime, which then allows you to avoid probate and control how your assets are distributed after death. While you’re alive, you continue to use the assets as you normally would, despite the technical name change. After your death, the trustee you named manages and distributes the assets to your beneficiaries according to your instructions.

DIY vs. professional assistance

You don't necessarily need an attorney to create a living trust. Online legal services, trust software, and fill-in-the-blank forms can work well for straightforward situations, such as a single person or a married couple with modest assets, clear beneficiary wishes, and property in only one state. DIY options typically cost between $100 and $300, compared to $1,000 to $3,000 or more for attorney-prepared trusts.

However, certain situations call for professional guidance. If you own a business, have a blended family, own real estate in multiple states, or have an estate large enough to trigger tax planning concerns, an attorney can help you avoid costly mistakes. Errors in DIY trusts, such as improperly funding the trust or using ambiguous language, can cause assets to go through probate anyway, therefore defeating the trust's purpose.

For most people with simple estates and clear intentions, a quality online legal service offers the right balance of affordability and reliability. When your situation involves complexity or significant assets, the investment in professional assistance often pays for itself.

What are the big benefits of having a living trust?

A revocable living trust can offer a variety of benefits that may make it attractive.

• Probate avoidance: When you make a living trust, the assets in the trust do not need to go through probate (the court procedure that verifies and enacts a will). This saves months of time and also avoids court costs and attorney fees.
• Privacy: Because the trust does not go through probate, it never becomes part of the public record. The names of your beneficiaries and the assets you pass to them remain secret.
• Flexibility: Revocable living trusts allow you to move assets in and out of the trust as you wish during your lifetime. If you change your mind, you can easily alter or eliminate the trust.

What are the drawbacks and limitations of living trusts?

While living trusts offer significant advantages, they come with real drawbacks you should weigh carefully before deciding.

• Higher upfront costs: A living trust costs more than drafting a simple will. Attorney-prepared trusts typically cost $1,000 to $3,000 or more, plus fees to retitle assets such as real estate and vehicles into the trust's name. Even DIY options require time and attention to detail.
• Ongoing maintenance: A trust isn't a set-it-and-forget-it document. You'll need to fund it properly by transferring assets into the trust's name, updating beneficiary designations, and retitling new assets as you acquire them. Unfunded trusts provide no probate protection.
• No tax benefits: A revocable living trust provides no income tax or estate tax advantages during your lifetime. The IRS treats trust assets as your personal assets, so you'll report all income on your regular tax return.
• No creditor protection: Because you retain control over a revocable trust, creditors can still reach those assets during your lifetime. If asset protection from lawsuits or creditors is your goal, a revocable living trust won't help—you'd need an irrevocable trust or another strategy.
• Added complexity: Trusts require more paperwork and attention than wills. Some people find the administrative burden of maintaining a trust outweighs the benefits, especially for smaller estates.

These limitations don't make living trusts a poor choice—they simply mean trusts aren't universally superior to other estate planning tools. The right approach depends on your specific circumstances, asset level, and priorities.

Who needs a living trust?

There are several situations in which a trust can be very important and useful.

• Incapacity planning: Should you become incapacitated during your lifetime and unable to manage your own affairs, the trust will already be in place with a trustee managing your assets. You most likely won't need to be declared incompetent, and someone you trust will make decisions for you.
• Immediate asset transfer: A living trust allows you to transfer your assets immediately after death, without interference. If you own a small business, a trust can help ensure there is no interruption in ownership and management. The trust can also ensure your bank accounts are not frozen upon your death.
• Controlled inheritance: A trust allows you to control when and how your beneficiaries receive their inheritance. Unlike a will, where all assets are disbursed once probate concludes, a trust lets you disburse amounts at various ages throughout their lives; useful if you are leaving significant funds to young adults who may not be mature enough to handle a large sum of money.
• Preventing will contests: If you think your will might be contested after your death, a trust lets you ensure your wishes are carried out without court interference. In particular, if you plan to disinherit a child, a trust offers more protection than a will—contested cases take two to three times longer than uncontested probate and could eventually be overturned. It may also allow you to disinherit a spouse, but the rules vary by state.

While there's no magic number that triggers the need for a living trust, net worth plays an important role in the decision. Trusts generally make financial sense for estates valued at $100,000 or more; roughly the point where probate costs and delays outweigh the expense of creating a trust. Probate typically costs 3% to 7% of your estate's value in court fees, attorney fees, and executor compensation. On a $200,000 estate, that's $6,000 to $14,000 that could have gone to your beneficiaries.

Your state's small estate threshold also matters. Most states allow simplified probate or no probate at all for estates under certain limits, ranging from $20,000 in some states to $200,000 or more in others. If your estate falls below your state's threshold, the streamlined process may make a trust unnecessary. Above that threshold, a living trust often becomes the more cost-effective choice, especially when you factor in the time savings and privacy benefits.

Is a trust for everyone?

Living trusts do not make sense for everyone. There are costs associated with setting up a trust, and in many situations, preparing a will and paying probate costs may be less expensive. A trust may not be necessary if:

• You have a small estate. You will likely qualify for your state's small estate probate procedure, which is fast and inexpensive.
• You are under 50. A living trust may not be necessary yet, since it will involve years of management.
• You plan to leave most assets to your spouse. You may be better served using a specialized trust that makes this transfer while avoiding estate taxes.
• Estate taxes are your primary concern. If your estate exceeds the federal estate tax exemption (currently $15 million per individual) or your state exemption, you may be better served focusing on estate planning measures to reduce your tax load.

That said, the "under 50" guideline deserves more nuance. Age alone shouldn't determine whether you need a trust; life circumstances matter more. A 35-year-old business owner with $500,000 in assets and young children has a stronger case for a living trust than a 55-year-old with a modest estate and grown children. Marriage, having minor children, starting a business, or accumulating significant assets are all triggers worth considering, regardless of your birthday.

For those approaching or past age 60, incapacity planning becomes increasingly important. A living trust ensures a successor trustee can manage your finances seamlessly if you become unable to do so, without court intervention or delays. This benefit alone often justifies creating a trust later in life, even for moderate estates. Rather than focusing on age cutoffs, consider your asset complexity, family situation, and how much you value avoiding probate and maintaining privacy.

What are the key differences between a living trust and a will?

Here are the key distinctions to consider if you are trying to decide which tool, or combination of tools, fits your situation. 

• Probate: A will must go through probate court before your assets can be distributed, a process that typically takes 6 to 18 months. Assets in a living trust transfer immediately to beneficiaries without court involvement.
• Privacy: Wills become part of the public record during probate, meaning anyone can see your assets and who inherited them. Living trusts remain private documents.
• Cost structure: Wills are cheaper to create but more expensive to execute; probate fees can consume 3% to 7% of your estate. Trusts cost more upfront, but avoid those backend costs.
• Incapacity protection: A will only takes effect after death and provides no help if you become incapacitated. A living trust allows your successor trustee to manage your assets immediately if you can't.
• Complexity: Wills are simpler to create and don't require transferring assets during your lifetime. Trusts require you to actively fund them by retitling assets.

For simple estates that fall below your state's small estate threshold, a will often makes sense; it's affordable, straightforward, and the streamlined probate process minimizes delays. If you have minor children, you'll need a will anyway to name guardians, since trusts cannot do this.

A living trust becomes the better choice when you have assets above the small estate threshold, own real estate in multiple states (which would otherwise require separate probate in each state), want to control inheritance timing for beneficiaries, or prioritize privacy. Many people use both: a living trust for the bulk of their assets and a pour-over will that catches anything not transferred to the trust during their lifetime.

To create a living trust, you will need to complete and sign living trust forms that designate your trustee, beneficiaries, trust terms, and trust assets. You'll also need to fund the trust by transferring ownership of assets into it. A living trust can be a very useful tool as part of your estate planning package, especially if probate avoidance, privacy, or controlled inheritance are priorities for you.

If you're ready to make a living trust, LegalZoom can help. Want to confirm which estate planning documents are needed for your situation? Use our Estate Plan Tool. Ready to build your estate plan? LegalZoom can help. We’re bundling all the key documents—a last will or a living trust, a power of attorney, a living will, and independent attorney advice—at an affordable price.