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a legal agreement to transfer your property to someone who then agrees to manage that property during your lifetime. You might do this if you have property you just can't or don't want to deal with. Or (this is how the term is more commonly used) you might use such an agreement to avoid (in most states) having your estate go through the customary time and expense of probate court.

The savings can be significant, taking up to three years and eating up to 10% of your estate's value. If you own property in another state, a living trust can eliminate the need to go through the probate court process in that state, too. Trust agreements remain confidential, while the conventional will becomes a matter of public record after you die. at the time of your death. And you won't have to worry about how properties will be managed if you become physically or mentally incapacitated.

However, setting up a trust requires a good bit of legal paperwork and expense, including revising title documents. You may have trouble refinancing any of those properties if you need to down the road. And unlike with a traditional estate, creditors have no cut-off date for bringing claims against the trust.

Trusts and estate planning can get very complicated. Speak with a lawyer, and read and understand everything before you sign.

Learn more about this author, Susan S. Flaherty.
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