A living trust is a great idea if you have a sizeable estate with real property involved. A living trust is created by placing some or all of your estate into a trust where you are the trustee and the beneficiary while you are alive. You name an administrator and secondary beneficiaries before you pass away, so that the property in the trust will avoid probate.
The title of a recent article in Redlands Daily Facts says it all: “Do I Need a Living Trust?”
For a married couple, another option is an AB or "by-pass" trust. Rather than each spouse leaving their property outright to each other, both place their property into their own revocable trust. When the first spouse dies, the surviving spouse receives income from the decedent’s trust property and in some situations has access to the principal. With an AB trust, the couple's children will typically inherit the trust property after the second spouse dies (as named beneficiaries of the trust). Due to the fact that the surviving spouse doesn't actually own the trust assets, they are not part of the surviving spouse's estate. As a result, those assets would not be subject to tax at the second spouse's death.
Trusts can be a real benefit to you, but they can get tricky quite quickly. It's best to speak with a knowledgeable estate planning attorney to examine your specific situation and needs.
Reference: Redlands Daily Facts, February 25, 2014: “Do I Need a Living Trust?”