A living trust allows you to place assets under the care of a trustee who then distributes the assets to the beneficiaries of your choosing, in accordance with the terms you've set forth in your trust document. A living trust is often used to protect assets from the expense and delays of the probate process. A revocable trust is taxed as the grantor's personal assets, while an irrevocable trust is taxed as an independent legal entity. You may establish a living trust by executing a trust document and placing assets into the trust. Although it is best to retain an attorney to draft the living trust, it is possible to draft it yourself with the aid of an online legal document provider.
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Determine whether the trust will be revocable or irrevocable. You may revoke a revocable living trust at any time, but in most states, you cannot revoke an irrevocable living trust without either the unanimous consent of the beneficiaries or a court order.
Name the living trust. Most grantors name the trust after themselves, as in "The John Doe Revocable Living Trust." Other names are possible, however. If you and your beneficiaries are close relatives, you might name it, "The Doe Family Living Trust," for example.
Entitle the trust document "[trust name] Living Trust" to leave no doubt as to its purpose and function. A trust is a legal relationship between a grantor, trustee and beneficiaries; therefore, the trust document serves as proof of the trust's existence and outlines its terms.
Identify yourself and your beneficiaries by full names and addresses, and begin the text of the trust document by stating you are executing the living trust in favor of the beneficiaries. It is also permissible to include unnamed beneficiaries -- "Larry Doe's children," for example, even if Larry doesn't have any children as of the date the living trust is executed.
Appoint a trustee. Although you may appoint yourself or another individual as trustee, problems might arise if the trustee dies before the trust terminates. Alternatively, you may appoint a trust company. Some living trusts appoint an alternate trustee in case the original trustee can no longer perform his duties at some point.
State whether the trust is revocable or irrevocable. Legal problems might arise if you neglect to include this information. In some states, a trust is presumed revocable unless the trust document states otherwise, while in other states the opposite presumption applies.
Add instructions for the disposition of trust assets. You might instruct the trustee to distribute trust assets on a particular date or upon the occurrence of a particular event, such as your death. Alternatively, you might have the trustee distribute trust assets periodically or invest trust assets and distribute only profits to your beneficiaries. You may grant your trustee broad discretion to invest trust assets as he sees fit or grant him no discretion at all.
Insert a clause that explains how the living trust can be amended or state it cannot be amended.
Specify what the trustee's compensation will be for performing his duties.
List the major assets of the trust. You may place this list in the text of the trust document itself or add an appendix and refer to it in the body of the text.
Sign and date the living trust. Although not required in most states, you may want to sign the document in the presence of a notary public and have him affix his seal to it. Notarization might provide extra protection against legal challenges to the validity of the trust, especially after you die.
Transfer title to all titled trust assets -- bank accounts, automobiles and real estate, for example -- to the name of the trust and turn over custody of all title documents to the trustee.