Living Trusts are best done by an attorney (although, they are 90% boiler plate and it seems that you could do a knock-off of somebody else's if you wished). The only other thing you would need to do is place your bank accounts, stock accounts, house(s), credit card accounts, and such with the following ownership (the Bank will probably want to see the first page of the trust):
Bill Smith Trustee
Mary Smith Trustee
Smith Family Trust
Basically now, if one or both Bill and Mary are gone, there is still a legal entity (the Smith Family Trust) that can manage and disperse the assets as directed by the trust through the trustee. It is basically that simple (from what I have seen).
There is one thing that is a little bit pain in the butt with placing Smith Family Trust on the bank and stock accounts... The bank wants to protect itself so--in Etrade's case--they will not let me Internet Link my Etrade Bank and Etrade Stock Trading accounts. Other than that, it has not been a problem.
Basically, for a married couple the Living Trust "keeps the dead partner legally alive" until the second one dies. Then the estate is distributed according to the terms of the trust and the trustee (get somebody you trust to be the trustee--they can really do your family bad if they have the intent) and both tax exemptions are available to shelter the taxes. If the surviving spouse wishes to change the terms of the trust, revoke the trust or spend the money until there is none left--there is nothing stopping them. (There are several sections to a living trust other than the one that the Trustee would use, but those are there for legal purposes and don't have any real effects on the day to day use of the trust). There is really no down side to the living trust.
Otherwise, with a will what usually happens is the spouse inherits the estate (tax free?) and then when the last one dies, there is only one tax exemption available for the survivors to use (instead of two). Plus, the estate must go through probate (attorneys and courts) to be resolved.
Remember, there is a $600,000 or so (the limit is rising until around 2008 when death taxes go away--then the next year they come back at the ~1/2 million dollar per person level again).
Now, if you have a multi-million dollar estate, then you can look at various insurance and irrevocable trusts to help pass the estate to the kids and grand kids in a more tax efficient manner.
But for Estates of 1.2 million or less, the Living Trust is the way to go! An hour or so with the Attorney, they put the name of the Living Trust on your house, and give you a copy of the trust that you take to your banks and such change the account names to conform with the trust.
-Bill