If you are using a living trust to manage your asset distribution after you pass away, here's a good explanation of how exactly your assets will be distributed.

Beneficiaries of a living trust come in three categories:

1. Primary Beneficiaries: this category consists of people or organizations designated to receive specific property.
2. Alternate Beneficiaries: this category consists of people or organizations who will receive property if the primary beneficiary dies before you do.
3. Residuary Beneficiaries: this category is set to receive all property not left to either the primary or alternate beneficiaries.

Generally with a living trust, you may choose anyone or any entity you desire to be your beneficiary. In a community property state, such as California, you are not required to leave anything to your spouse in your living trust. Both spouses are considered to own equal parts of everything earned during the length of the marriage.

In separate property states, the rules are a little different. While your spouse is not automatically granted part of your estate, he or she may have a strong claim to your trust if you leave him or her less than one-third to one-half of your property. Also in many states, minor children have the right to inherit the family residence. If your living trust does not provide these legal minimums to your spouse or children, they can challenge the legality of the trust in court. If a court finds that the challenger's claim has merit, your trust is not entirely invalidated. The court will more than likely alter the trust to accommodate the challenger's claims.

Your living trust is a good way to leave property to children. If your children are very young, or if you would like to keep your property in the trust, you can create something called a children's subtrust. Keep the property in trust and designate an adult to manage the property on behalf of the child. The subtrust will end when you want it to; for example, you can choose a specific age or even a life event, like a college graduation. Remember, you can't use your living trust to appoint a guardian for your minor children; instead, do this through a traditional will. If you want to exclude a child from your trust, make sure you state your intention as clearly as possible. If it seems like you overlooked a child accidentally in your trust, a court may modify the trust for that child's benefit.

For more information about living trusts, visit our partner LegalZoom. Here, you'll find a free, online legal library providing all the information and resources you need when considering a living trust to manage your assets. The Law Library Topics provide general living trust information, and FAQs answer some of the most common questions people ask. These features, combined with the Glossary and Useful Resources, allow you to better understand the estate planning benefits provided by a living trust.

LegalZoom is not a lawfirm and can only provide self-help services at your specific direction. Information contained above is subject to change and is not applicable to every state. Visit LegalZoom.com for specific state-by state-documents.

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