What defines a "living trust"?

A living trust is defined specifically as a trust that is created during an individual's lifetime. This structure allows the person who creates the trust—often referred to as the grantor or settlor—to manage their assets while they are alive and dictate how those assets will be handled after their death.

Living trusts provide several advantages, including the ability to avoid probate, streamline the management of assets in the event of incapacity, and offer a level of privacy regarding estate distribution. This contrasts with other types of trusts, such as testamentary trusts, which are established through a will and come into effect only after the individual's death.

In contrast, the other options refer to different types of trusts or mischaracterize the nature of a living trust. For instance, a trust for minors suggests a trust meant for children that is managed by guardians, which does not align with the principles of a living trust. Similarly, the option about being set up by a will is not applicable, as living trusts are inherently created while the grantor is alive, and stating that a trust cannot be modified contradicts the typical characteristics of a living trust, which often allows for modifications as per the grantor’s wishes during their lifetime.