**Living trust** (noun) — A trust created and funded by a person during their lifetime, as opposed to a testamentary trust that is created through a will and takes effect only upon death. Also called an inter vivos trust. The person who creates the trust (the settlor or grantor) transfers assets into the trust, which are then managed by a trustee for the benefit of named beneficiaries. Living trusts can be revocable (can be changed or cancelled) or irrevocable (cannot be changed once created).
A living trust is a legal arrangement you set up while you're alive to hold and manage your assets, either for yourself now or for beneficiaries after you die.
Think of it as a container you create for your property. You put assets into it—bank accounts, property, investments—and appoint someone (often yourself initially) to manage those assets according to the rules you've set out in the trust deed.
The most common type is a revocable living trust, where you keep full control. You can change the terms, add or remove assets, or cancel the trust entirely. You're usually the trustee (the manager) and the beneficiary (the person who benefits) during your lifetime. When you die, the person you've named as successor trustee takes over and distributes the assets to your final beneficiaries according to your instructions.
An irrevocable living trust is different—once you create it and transfer assets in, you generally can't take them back or change the terms. These are less flexible but can offer benefits like asset protection or tax advantages in some circumstances.
The key difference from a will is that a living trust operates now, during your lifetime, rather than only taking effect when you die.
⏱ When you'll encounter this term
Living trusts are popular estate planning tools in some countries, particularly the United States, but their usefulness varies significantly depending on where you live.
**In the United States**, living trusts are widely used primarily to avoid probate. Probate in the US can be expensive, slow, and public. Assets held in a living trust bypass the probate process entirely—when you die, your successor trustee simply distributes the trust assets according to your instructions without court involvement. This saves time, money, and maintains privacy.
**In Australia**, living trusts (called inter vivos trusts here) serve different purposes. Because Australian probate is generally faster and less expensive than in the US, probate avoidance isn't usually the primary motivation. Instead, Australians might use living trusts for asset protection, tax planning, or managing assets for people who can't manage their own affairs. They're also sometimes used in blended family situations to ensure assets are preserved for children from a first relationship while still providing for a current spouse.
**In the UK**, living trusts are less common for basic estate planning. The UK has its own trust taxation rules, and for most people, a properly drafted will achieves their goals more simply and cost-effectively.
Important considerations with living trusts:
First, funding is critical. Creating the trust document means nothing if you don't actually transfer assets into it. You need to change ownership of your property, bank accounts, shares, and other assets from your personal name to the name of the trust. This process is called "funding the trust," and it can be time-consuming and sometimes costly (title changes, deed registrations, etc.).
Second, living trusts don't avoid all administrative requirements. In Australia, for example, trust assets are generally not counted when applying for probate, but you'll still need to go through probate for any assets you own personally (not in the trust). And trusts have their own administrative requirements—tax returns, formal trustee decisions, record-keeping.
Third, cost and complexity. Living trusts are more expensive to set up than basic wills and require ongoing administration. For many people, especially those with modest estates, the benefits don't justify the cost.
Fourth, they don't necessarily save tax. In Australia, trusts can be useful for income splitting and tax planning during your lifetime, but they don't save capital gains tax on death (the CGT rules are complex). In the US, revocable living trusts offer no income tax or estate tax savings during your lifetime or at death—though irrevocable trusts can in some circumstances.
Fifth, limitations. A living trust doesn't let you name guardians for minor children (you need a will for that). It doesn't avoid all creditors. And if you're receiving or might receive government benefits, transferring assets to certain types of trusts can affect your eligibility.
When might a living trust make sense? - You own property in multiple states or countries (probate in each jurisdiction can be avoided) - You want privacy (trust distributions aren't public like probate) - You have a complex family situation requiring specific asset control - You need professional asset management during your lifetime and after death - You want to ensure seamless management if you become incapacitated (your successor trustee can step in immediately)
When might a simple will be sufficient? - Your estate is straightforward - Probate in your jurisdiction is not particularly burdensome - You want the most cost-effective solution - You don't have concerns about privacy or contest
If you're considering a living trust, get advice from an estate planning lawyer in your jurisdiction. What works in one country may be unnecessary or even disadvantageous in another.
**Related terms:** [Trust](/dictionary/trust), [Inter vivos trust](/dictionary/inter-vivos-trust), [Revocable trust](/dictionary/revocable-trust), [Irrevocable trust](/dictionary/irrevocable-trust), [Testamentary trust](/dictionary/testamentary-trust), [Settlor](/dictionary/settlor), [Trustee](/dictionary/trustee), [Beneficiary](/dictionary/beneficiary)
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