What Constitutes a Legal Living Trust?
A living, or inter vivos, trust is a legal tool created by a living individual to manage his assets both during (and often after) his lifetime. All inter vivos trusts require several general elements, but detailed requirements for a legal inter vivos trust typically come from individual state law. Therefore, anyone considering creation of an inter vivos trust should speak to a local estate law attorney.
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Trust Execution
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In most states, creation of an inter vivos trust requires some form of trust agreement, a legal document signed by the party who's creating the trust. This document can take many forms under varying states' laws. However, the document does need to show, in some form, its creator's intent that another party take title to his assets and keep them with the intention to use them for someone else's benefit. For instance: "Ann to hold the property, use it and manage it for the benefit of John."
Valid Settlor
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The legal term for the individual who creates a trust is the "settlor." A single trust can have multiple settlors; spouses, for instance, often use the inter vivos trust for estate planning purposes. Settlors must have reached their state's majority age (18 in most jurisdictions), although the law may make exceptions for married teenagers or children who have legally emancipated themselves. A settlor must be of sound mind under his jurisdiction's law at the moment he executes the trust, or a court may hold the trust invalid.
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Beneficiary Requirement
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Any type of inter vivos trust needs at least one clearly defined person (or definite class of people, in the case of charitable trusts) to serve as the trust beneficiary. These "beneficiaries" hold equitable title to the property, meaning that although they don't own the property themselves, they will receive its benefits. Anyone, even corporations, can be a beneficiary.
Trustee Requirement
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All trusts demand at least one trustee, an individual who takes actual, legal title to the settlor's property. Courts can appoint a trustee if the trust document fails to name one. The trustee must have some sort of duties stipulated in the trust instrument; otherwise, the law considers the trust "dry," and legal title to the trust assets will simply pass on to the beneficiaries. A trustee must typically be legally capable of taking and owning property, and both legally and physically capable of performing all duties spelled out by the settlor. In most trusts, the settlor can serve as trustee. If there are multiple trustees, the beneficiary may serve as a trustee as well.
Res Requirement
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The entire purpose of a trust is one party holding property for the benefit of another. Therefore, all trusts demand specific, designated property that acts as the "res," or trust property. The res must be an interest held by the settlor in existing property (no nebulous property that the settlor only might acquire someday.) The law also recognizes a definite future interest in property that already exists, and future profits that will definitely result from an existing contract.
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References
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