What is a living trust?

A living trust is defined as a trust that is created during a person's lifetime, allowing for the management and distribution of their assets while they are still alive. This type of trust provides significant benefits, including avoiding probate, maintaining privacy regarding the distribution of assets, and ensuring that the individual's wishes regarding asset management are followed during their lifetime and after death.

The key characteristic of a living trust is that it takes effect during the grantor’s lifetime, allowing them to retain control over the assets they place in the trust until they choose to distribute them to beneficiaries. This can simplify the transition of assets upon death and help manage any incapacity the individual may face while alive.

A trust established posthumously would not be considered a living trust since it comes into effect only after the individual's death. Similarly, a temporary financial arrangement for minors does not capture the essence of a living trust, as it refers to a different type of financial management tailored for children. Lastly, while a trust for distributing assets equitably among heirs might share some similarities in function, it does not specifically define the mechanism of asset management and flexibility that a living trust provides while the grantor is still alive.