Will my beneficiaries have to pay estate taxes or go through probate if I set up a living trust?

A revocable living trust allows you to "self-probate" your assets while you are alive and competent. The funding or retitling component of the revocable living trust process allows you, as the trust maker, to transfer your assets into your trust and consequently avoid the probate process. Whether forming a trust will reduce your estate taxes will largely depend on the type of living trust that you choose to create. If you form a revocable living trust, you can move assets in and out of the trust anytime you wish, but you will not reduce your taxes. If you choose an irrevocable trust, the assets you put in the trust will have to stay there, but the trust may provide you with tax advantages. Remember, though, estate taxes do not come into play in 2004 unless the estate is worth more than $1.5 million.