What is a living trust?

A living trust is indeed a trust created by a person during his or her lifetime. This type of trust allows individuals to manage their assets while they are alive and provides a mechanism for transferring those assets upon their death without the need for probate. By establishing a living trust, the individual can specify how their assets are to be distributed, avoid the lengthy and potentially costly probate process, and maintain greater control over their estate.

In contrast, a trust established only after the individual’s death would be classified as a testamentary trust, which is set up according to the terms laid out in a will. A type of retirement account does not fit the definition of a living trust, as it pertains to financial savings behavior rather than the legal framework of asset management. Lastly, a contract for healthcare decisions is significantly different as it involves medical choices rather than the management of assets. Overall, the living trust stands out for its purpose in estate planning and asset management during one's lifetime.