A living trust, also known as an inter-vivos trust, is one in which the grantor still is in possession of the assets that will eventually pass through his or her estate. The living trust may be revocable, which means it's not binding after the grantor decides to revoke the trust. Normally, irrevocable status in a trust means that the assets will pass through the estate immediately for reporting purposes making the taxable estate smaller.

These trusts take effect while the grantor is still alive; hence the name, living trust as opposed to testamentary trusts that take effect after death.

Most people who are relatively still young will benefit from creating a living trust to make sure that the assets in the estate will not have to go into probate upon death. Probate is costly and delays the time that the assets can be disbursed as articulated in the testamentary will. Living trusts are able to mitigate that and are easy to set up with the help of a financial adviser.

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