A living trust is created while you are alive. A trust is a legal arrangement between a trustee and a beneficiary. The trustee holds legal title to property for the beneficiary.

Living trusts are used to define long term property management arrangements, to decrease estate taxes, or to avoid probate. A revocable living trust can take the place of a will. Upon the trustee’s death, assets are transferred to beneficiaries, without involving court or probate. The process is often less expensive and more efficient than working with a will. A living trust may also protect you while you are alive, should you become incapacitated.

A living trust may not be for everyone. A living trust that is drafted incorrectly can be difficult to fix. Avoid the following major mistakes when drafting a living trust:

 1   Not Understanding Your State’s Probate Process and Fees

In some states, such as California, probate fees are high. This means that having a will might make more sense than having a living trust, depending upon your state of residence.

 2   Not Adequately Protecting All Assets

If any of your assets are not included in the original drafting of the living trust, these assets could be subject to regular probate procedures upon your death. Make sure that all assets are included in your living trust.

 3   Assuming That a Living Trust Takes the Place of a Will

It may be beneficial to have a will in place, even with a living trust. If you have property that does not make it into your living trust – for example, property that you acquired right before death – that property can be covered by your will. The backup will can identify who should get any property that has not already been left to another person or entity.

With no back up will, property that is not covered by the living trust will be distributed according to state law.

 4   Assuming That Your Living Trust Will Help You Avoid Estate Tax

A basic living trust, established to avoid probate, may not help avoid taxes. However, complex living trusts, such as the AB Trust, can help you save federal estate taxes. The AB Trust (also known as the credit shelter trust, marital life estate trust, or marital bypass trust) is designated for married couples who have children. Parents transfer assets to each other, for their lifetimes, in trust. Then assets are transferred to the children.

Learn more about AB Trusts at http://www.nolo.com/article.cfm/objectID/2D207FE3-B4EC-4599-BE0A3981C99F0D10/309/227/ART/

 5   Trying to Draft Your Living Trust without Help

While do-it-yourself options are available for drafting living trusts, the living trust is a complex legal document. A simplified living trust that you fill out yourself may not adequately provide for your heirs. It may be tempting to save time and expense, but it may be worthwhile to research and hire an experienced lawyer to draft your living trust.

 6   Hiring a Lawyer or Law Firm with Little or No Estate Planning or Living Trust Experience

It may be useful to research the lawyer who will help you draft your living trust. Some issues that might be important to research are the law firm’s specialty and the length of time the firm has been preparing wills and living trusts.

 7   Letting the Cost of a Living Trust Dissuade You from Completing Your Trust

Living trusts can cost three to five times more than preparing a will. It is important to consider if the long term savings and benefits outweigh initial costs for a living trust. Consult your lawyer and consider all factors in making this decision.

 8   Failing to Consider Your Age or Health When Deciding to Draft a Living Trust

If you are young and have not yet accumulated many assets, a will may be more appropriate for you for now. Similarly, if you are healthy, and incapacitation or progressive disease is not a concern, a will may be more suitable for you. If you want someone else to take over the living trust management duties, should you become incapacitated, you will need to arrange for this. Consider asking an estate attorney if the time and expense of keeping a living trust up to date is right for you.

 9   Failing to Consider the Amount of Your Assets When Deciding to Draft a Living Trust

If your estate includes assets such as property in more than one state, a living trust may prove more beneficial than a will. If your assets exceed a certain amount, a living trust may be the best route in your estate planning.

 10   Failing to Consider Family Dynamics When Choosing Between a Living Trust and a Will

A living trust may be the appropriate choice when deciding that assets should go to your children from a previous marriage rather than to your stepchildren. Using a will and going through the court and probate process may be the best route if your family may require the guidance or leadership of probate court when your assets need to be distributed.