The
Living Trust is also sometimes called a Revocable Trust or an Inter Vivos
Trust is an important legal tool for wealth preservation, accomplishing the
purposes of a person upon death and avoiding the cost and time of probate. It is a legal entity created by an person
called the Settlor, Grantor or Trustmaker that has the authority established by
a properly drawn Trust instrument, through the Trustee, to own property
conveyed to the Trust by the Settlor.
Usually the Settlor is also the first Trustee and names Successor
Trustees to act if he or she is no longer willing or able to act as Trustee. A Settlor-Trustee controls the property in
the Living Trust and can change or revoke it at any time.
The
Living Trust avoids probate because assets conveyed to the Living Trust,
are no longer owned by the Settlor but by the Trustee of the Living Trust. Accordingly, there is no need for those
assets to be probated when the Settlor dies because the Settlor technically did
not own them. Instead, the Successor Trustee manages and distributes assets
according to the terms established by the Settlor without any court supervision
or interference. And the Successor
Trustee has a fiduciary duty under the law to faithfully carry out the terms of
the Living Trust.
While
the Settlor is alive, competent, and acting as Trustee, he or she has full authority to
withdraw, add, manage, invest, and spend the trust assets for his or her own
benefit or to revoke the Trust entirely and resume personal ownership of the
assets.
The
Living Trust is not a substitute for a Will. The Settlor will need a will
even after making a Living Trust for a number of reasons. Often the will ”pours over” property not in
the Living Trust into the Living Trust so it may be distributed according to
the terms of the Living Trust by the Successor Trustee.
If the Settlor is alive but incapacitated
or no longer wants to be bothered with administration of the Trust, a Successor Trustee named by the Settlor will
take over the duties of Trustee. The
Successor Trustee may be a trusted, capable person or the Trust Department of a
Bank. Successor Trustees are paid a
reasonable fee for their service generally consistent with the published
schedules of bank trust departments.
When
the Settlor dies, the Successor Trustee named by the Settlor will carry out
the terms of the Trust for the beneficiaries named by the Settlor. The Settlor may direct that the income from
the trust be used for specific purposes such as the education of beneficiaries
and provide for the distribution of assets to beneficiaries when they reach a
certain age, among other options.
Living
Trusts may also be designed to avoid or minimize Estate Taxes provide for
charitable donations and accomplish a variety of other purposes for the
Settlor. It provides the Settlor with a
powerful instrument to accomplish his or her purposes.
Married
couples may establish a Family Living Trust or Individual Living Trusts depending
on their needs and interests.
