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Do you need a "Living Trust"? The question is easy, the answer is not so easy. In the world of estate planning, there are two answers to almost every question: 1) Well, it depends; 2) Because the IRS said so. Whether or not you need a living trust falls in the category of the first-Well, it depends.

A Revocable Living Trust (RLT)-commonly known as a living trust-is a fairly basic, simple document that allows the trustor (the one who creates the trust) to make it as complicated as they please. The cookie-cutter version can be picked in almost any office supply aisle in the local mega-mart or office supply store for under $50.00. With little effort you may even be able to find one on the Internet for free. But the more complex versions often come from an attorney; having read many of these, I'm convinced the drafting attorney is paid by the word.

A trust's basic premise is in its name-trust. That is, the trustor trusts the trustee (the entity administering the trust-it doesn't have to be a person) to do what the trust instructs. That is, in general, and also specifically as it relates to the trust beneficiaries (those who receive a benefit from the trust).

Where it gets complicated is what exactly the trustor trusts the trustee to do. In that way, a living trust is very similar to a standard Will.

The average Joe/Jane is often scared into 'buying' a living trust (often in the form of an one-size-fits-all package deal) to 'avoid probate'. Without a doubt, this is one of the best marketing hoaxes ever. Probate is nothing to be afraid of; it is simply the orderly transfer of property from one owner to another. What really makes this a hoax is that the process a person uses to transfer property into a trust is the same as it would be in probate. Only now the trustee has to do it AGAIN to get it to your beneficiaries. As if that isn't enough, your estate is still going to go through probate (let's see you title your pots and pans to the trust), it will just have less to probate.

In general people does not need a living trust. In fact, the average person should not have a living trust. There are nuances to serving as trustee that are easy to overlook or misconstrue. To make matters worse, the IRS (remember them from #2 in the first paragraph) looks for the most common oversight-failure to create and file a Schedule K-1-and pounces.

That said, there are four (4) situations when a Living Trust makes sence:
A) Out-of-State Real Estate-If you own real estate outside your state

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