About Living Trusts

A living trust is an estate planning tool that is usually drafted by an estate attorney. Unlike trusts created after death, a living trust is created while the individual is still alive. Living trusts are very easy to set up and maintain and allow a greater amount of control over personal assets, particularly after the death of the individual or couple.

Difficulty: Easy

Instructions

History

1. Dating back to sixteenth-century England, landowners used trusts to keep the king from controlling their property after their death. Landowners formed trusts with the church by deeding their property over to it. The church would then deed the land back to the rightful heirs when the landowner died. The first settlers in America brought with them the English concepts of probate and trusts.

Significance

2. Living trusts allow an individual or couple to rest assured that their wishes will be carried out after their death. A living trust is usually controlled by one person who will make sure the individual's requests are fulfilled exactly. Asset distribution, care of disabled or handicapped relatives, or even the care of minor children can all be included in a living trust.

Function

3. A living trust involves three different parties. The individual or couple that establishes the trust is the "grantor." The "trustee" is the person who controls the assets of the living trust and can be the same person as the grantor. The "beneficiaries" are the heirs that will benefit from the trust after the grantor's death. Assets that can be placed in a trust include but are not limited to savings accounts, stocks, bonds and real estate. To include an item in a living trust, the name or title of the asset must be changed to the name of the trust.

Benefits

4. Estates valued at $100,000 or more are usually subjected to probate. Since living trusts are considered by the court to be a separate legal entity, asset distribution can be made by the trustee without having to deal with a lengthy and expensive probate process. Living trusts are also beneficial for complicated family situations. For example, spouses with children from a previous marriage can make sure those children receive their inheritance.

Considerations

5. Once a trust is established, all of the assets must continue to be registered to the trustee. From time to time, organizations dealing with the trustee (like banks for example) may ask to review the trust to confirm the trustee's powers. Only an estate planning professional can provide the necessary information to help grantors make informed decisions regarding their living trust.

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