As an alternative to having a complete Last Will and Testament, some people choose to dispose of their assets through the use of a revocable inter vivos trust, also commonly known as a "living trust".

        With this type of arrangement, a written trust agreement usually provides that the creator of the trust has the right to receive all of the income for life, to remove whatever other assets he so desires from the trust, and to revoke the entire trust and reclaim all of the assets at any time.

        Upon the death of the creator (also known as the "grantor" or "settlor"), the assets are then distributed to named beneficiaries, or may be held in further trust according to the terms of the trust agreement.

        The advantages of using a living trust in lieu of a will are:

        1.         Avoiding Probate. If all of the deceased person's assets were titled in the name of the trust, then there will be no need to probate a will with the Surrogate, or the equivalent office in another state.

        2.         Privacy. A probated will usually become a publicly-available document, though the size of the estate and the exact assets are not usually described in the will. In contrast, a trust is not a public document.

        3.         Management During Disability. If the grantor is no longer able to manage his or her finances, the successor trustee can then act as trustee, and use the funds for the grantor. This is usually preferable to an agent under a power of attorney.

        The disadvantages of the use of a living trust are:

        1.         Re-titling of Assets. To fully avoid the probate process, it is necessary for the individual to transfer all his or her assets so that they are not held in his or her name, but instead are held in the name of the trust. This can make things cumbersome to manage during the grantor's lifetime, especially with banks, brokerage houses or other financial institutions.

        2.         The Necessity of Last Will and Testament and Probate. Unless every asset that the decedent owned was titled in the name of the trust prior to death, a will must still be probated so the other assets may be directed into the trust after death. For example, if there is a last paycheck or other asset which is still in the name of the decedent, it is only the executor who can transfer the asset. Usually a person who is making use of a revocable trust in lieu of a will also has a short "cleanup" will, which merely directs that all assets remaining in the grantor's name will pour over into the trust.

        3.         No Tax Savings. The use of a living trust does not save on any taxes. The federal estate tax laws (and the inheritance or estate tax laws of most states), provide that any assets over which a person has the right to revoke and claim as their own (such as in a revocable trust) are includible in the gross taxable estate even if no will is ever probated.

        The word "probate" has several different meanings, which has been at the heart of much confusion.

        The narrowest definition of the word "probate" is the process of legally determining that a certain document is the last will and testament of the decedent. Once a last will and testament has been "probated" it means that there has been a legally binding determination that the document is the last will and testament of the decedent, which will be used to administer the estate and distribute the assets. In New Jersey, this is usually the least difficult part of the estate administration process. In certain other states, such as New York, Florida, California and Texas, this procedure can be burdensome, expensive, or both.

        The second meaning of "probate" is the broadest meaning, which is the entire process of administering the estate, including accumulating the assets, paying the debts, selling assets as needed, filing the tax returns and distributing the proceeds.

        The term "probate assets" is sometimes used to describe the assets which passed according to a will or by intestacy. The term "probate estate" usually means those assets of the decedent which passed according to the terms of the last will and testament, or would pass according to the intestacy statute in the event there is no last will and testament. The term "non-probate estate" is then used to describe the assets which pass according to a beneficiary designation, rather than by will, such as life insurance policies, retirement benefits, jointly-held accounts, or a pay on death account.

        While the use of a living trust as a will substitute may avoid the process of having the will admitted to probate, it does not avoid the need for these other processes.