Create Living Trust

• The most common types of living trusts are relatively simple legal instruments to create. Trusts are set up to administer and direct the assets of a person, the grantor, to her beneficiaries. In a living trust, the grantor makes himself the primary beneficiary of the trust. His heirs are named successors, and assume control of the trust when the primary beneficiary dies. Living trusts can easily be dissolved by the grantor, making them a non-permanent and flexible solution to inheritance management.
  
  

Avoid Probate Costs

• When a will is executed, heirs must deal with probate costs, and sometimes must pay a fee based on the amount of their inheritance. The process can be long and detailed, depending on the structure of a will. When the primary beneficiary of a trust dies, however, control of the trust passes to those named as his successors. Because assets are still controlled by the trust, there are no probate costs and the restructuring process takes only a few weeks.
  
  

Protect Privacy

• A court executes a will. Court proceedings are a matter of public record, so your financial details as well as information about your heirs goes into the public record as part of the probate process. When you die as the beneficiary of a living trust, the trust still controls your assets; the only legal issues that arise are naming and securing your successor, leaving all property and financial matters out of the public record.
  
  

Trusts and Inheritance Taxes

• Most living trusts don't effect your tax situation. Simple trusts do not protect your heirs from federal inheritance taxes, which can become quite steep in large estates. For most Americans, this is not an issue, as federal estate taxes apply only to estates worth more than $3.5 million as of fiscal year 2009. Regardless of the type of trust you create, the bottom line on your income taxes is not affected by putting your assets into a trust.
  
  

Tax-Saving Trusts

• Roughly 1 percent of Americans have estates large enough to trigger federal estate taxes. Those who do can bypass these taxes by creating a specific trust, referred to as an A-B trust. Instead of leaving assets to their spouses when they die, grantors turn over their half of the estate to an irrevocable trust that cannot be dissolved, naming the surviving spouse as the beneficiary. When both spouses die, the trusts turn assets over to successors, usually children. This process effectively splits an estate into two parts, helping keep inheritance sums under the minimum taxable amount.