If I make a living trust, do I still need a will?

Yes, you do -- and here's why:

A will is an essential back-up device for property that you don't transfer to yourself as trustee. For example, if you acquire property shortly before you die, you may not think to transfer ownership of it to your trust -- which means that it won't pass under the terms of the trust document. But in your will, you can include a clause that names someone to get all of the property that you haven't left to a specific beneficiary.

If you don't have a will, any property that isn't transferred by your living trust or other probate-avoidance device (such as joint tenancy) will go to your closest relatives in an order determined by state law. These laws may not distribute property in the way you would have chosen.

For more on wills, see Wills FAQ.

Can a living trust reduce estate taxes?

A simple probate-avoidance living trust has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal estate tax bill for people who own a lot of valuable assets.

One tax-saving living trust is designed primarily for married couples with children. It's commonly called an AB trust, though it goes by many other names, including "credit shelter trust," "exemption trust," "marital life estate trust," and "marital bypass trust." Each spouse leaves property, in trust, to the other for life, and then to the children. This type of trust can save up to hundreds of thousands of dollars in estate taxes, money that will be passed on to the couple's final inheritors.

Living Trust Software Quicken Willmaker Plus can create a living trust or an AB trust for you. If you need to update your other documents, Quicken Willmaker Plus also contains wills, financial powers of attorney, and health care directives (living wills).