Living trust definitions and types of living trusts

Living trust definitions
A living trust is a legal entity capable of owning property. A living trust is between living persons, hence the legal term "inter vivos", (among the living). A living trust may be revocable, or irrevocable. Normally unless the trust assets are very large the trust is revocable at will by the Trustor. Upon the death of the Trustor the trust becomes irrevocable. Several types of living trusts are common.


AB Living Trust
The AB Living Trust, (also known as an exemption trust), is preferable for many wealthy married couples over a traditional joint trust because of its potential estate tax savings for the heirs. Upon the death of spouse "A" the estate splits into two portions, A and B with the "A" portion becoming an irrevocable trust. The surviving spouse cannot sell the property in trust A, but can use that property and any income it generates. Trust B remains revocable and under the full control of party B.

When party B dies the trust property is distributed to the heirs and retains the standard estate death tax exemption of each original spouse. The estate tax exemption currently (in 2007) is $2,000,000 so an AB Living Trust could shield up to $4,000,000 from estate taxes. The estate tax is currently in flux so the future value of the AB Living Trust is unknown. Given the size of the Federal budget deficit I expect the estate tax will remain in effect, and the rates could increase.


A special living trust, living trust senior, and a minors trust are created to ensure that beneficiaries who are developmentally disabled, or mentally ill can receive inheritances without losing access to essential government benefits. A special living trust, living trust senior, and minors trusts allow control of how the assets held by the trust are managed and distributed. For example, one could leave money for somebody who may not be mature enough, or otherwise able to handle money, and state that the money can only be used for the health, education, support and maintenance of that person until the age of 35, upon which time the remaining income and principal will be distributed.

Return from Living Trust definitions to Estate Plan


Return from Living Trust definitions to Baby-Boomers-Life.com