I think the answer I'm about to give is found in some of the other answers you got, but if it's helpful:
Section 1016 gives an heir a basis step up to FMV for all assets that were includible in a decedent's taxable estate, with some exceptions not relevant here. So as long as you continue to control the trust such that the trust's property is includible in your taxable estate, the basis step up will be available. If your trust allows you to continue to manage the trust property, and keep the income for yourself, etc, the property will be includible in your taxable estate and the basis step up will be available.
The rules for probate vary by state, but probate is not the test - the test is oinclusion in the taxable estate. For example, in NY where I live, interests in real estate held jointly with a spouse pass outside of probate, but they are still includible in the taxable estate, and the step up applies.
There are lots of proposals to overhaul the Federal estate tax. they are not likely to pass this year, but keep in mind that some of these proposals would eliminate the basis step up altogether. One of the problems with estate planning is that the rules change pretty frequently.
And, as one poster said, you should talk to an attorney (or CPA, if all you want is tax advice) about your estate plan in general. Living trusts can be great, but there are always issues you can't know about.
jrad (or ruby if you see this): just got my first 2011 K-1 (ARLP). Seemed OK until I entered box 17 amounts into TT. 17a and 17c apparently are added to box 1 for AMT purposes and this makes the total of those 3 numbers greater than my distributions, meaning this investment was more than 100% taxable.
Does that seem right? In particular box 17c is a depletion amount - so why should a depletion amount actually increase my tax? Also there is no other depletion amount anywhere in box 20 - so do you not get any benefit for depletion for non oil-and-gas MLPs?