The "Living Trust" term comes from the Latin "Inter Vivos" which means "during life". This phrase is used to refer to the making of a gift while a person is still alive, unlike a bequest in a will. So a Living Trust or Inter Vivos Trust is a property controlling entity that is created and goes into effect while you are still alive, and will remain as long as you want it to, after your demise.
Trusts date back to the days of European Kings and conquerors during the Middle Ages. It seems that when a knight went off to fight in faraway lands for his King, the very same King often had the bad habit of taking over the management of any property owned by the knight. Eventually, the King would claim ownership of the property, considering it as payment for the management services rendered. Since some of these wars lasted for many years, the knight would come to nothing!
But, when the knights discovered Inter Vivos Trusts and placed their property in them before going away to war, they secured greatly enhanced asset and property protection. The Trust was an organized, legal vehicle complete with an appointed Trustee. Back then, the church was the Trustee of choice for the best chance of getting the property back later. This Trustee was given the responsibility and power to manage the property and defend it from any claims of abandonment or other false claims the government might have made against it.
Eventually, the concept of the Living Trust migrated across the Atlantic. In 1765, Patrick Henry (who was not a lawyer) became the first to write a Living Trust in the New World. The Trust was written for Robert Morris, Governor of the Virginia colony. Interestingly, his Trust, the North American Land Company, is still operational today!
However, for most of the history of the United States, Living Trusts were not very popular with the mainstream population. This was because in modern times (the birth of the IRS), a separate trust tax return was required each year for all Trust holders which is known as IRS Tax Form 1041. Fortunately in 1981, congress passed a law that allows all American taxpayers to draft a Trust and no longer be required to file a separate Trust tax return (as long as you remain competent and in charge of your trust estate). That opened up the floodgate for this very popular legal estate planning vehicle here in the United States. It is being utilized today by younger and younger generations. (I have written trusts for executives still in their 20's!)
Prior to this huge IRS tax law change the Living Trust concept was usually used only in cases of vast riches. You can bet that most of the past relatives of families such as the Kennedy's, Vanderbilt's, and Rockefellers, had either a Living Trust or a Testamentary Trust in their Will when they died. (A Testamentary Trust is just a trust that is born upon your death and controls your money and property for the sake of your surviving heirs.)
When the tax law first changed, people caught on pretty slowly. But the Living Trust revolution gained steam throughout the 80's and was at full pace by the early 90's. Sadly, in spite of the revolution, about 70% of Americans today still die intestate, meaning they have no Will or Trust in place to control their lifetime achievement - their estate!
And just as the Trusts of old protected the property of knights, placing your property into a Trust with someone in charge as Trustee does protect your assets for both a long term disability as well as for your eventual demise. It was a good idea back in the beginning when they first came onto the scene -- and it is just as good an idea today.
Today, properly signed and funded Living Trusts also protect you against high legal fees as long as you choose adequate (meaning trustworthy and financially smart) Trustees and appoint one or two backup Trustees. This will insure that someone will always be in charge, and thus court intervention can be prevented.
The Trust Portfolio of almost any Arizona practitioner also contains valuable Power of Attorney documents. If you don't have these documents, a court may order a Conservatorship in the event that you become disabled. In Arizona, a legal Conservatorship requires attorney representation and multiple court appearances each year until you either recover or die. During this time, you can expect continuous generous withdrawals from your checking account. Fortunately, this "living hell" money scenario can easily be avoided via a low cost properly executed General Durable Power of Attorney document in most cases.
In summary, a Living Trust allows professional management of your property when you are disabled or die. The rest of the coordinated legal documents in a modern Trust Portfolio protect you further from hefty legal expenses and court fees. Normally, this holds true even without invoking an official court declared "disabled" status.
This allows the agent you appoint on your Money Care Power of Attorney document to manage your affairs privately without the extra expense of legal representation required by the court as is the case in Arizona with a legal court Conservatorship. Also, it allows your medical power of attorney agent to represent you in all medical decisions when you can't make them.