Estates & Living Trusts
The two primary vehicles for managing your estate for beneficiaries are the last will and testament and the trust. Two types of trusts are possible: the testamentary trust, which takes effect when you die, and the living trust, which takes effect while you are still alive. A living trust can be either revocable or irrevocable.
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Structure
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A trust is created by three parties and one document. The grantor is the one who creates the trust and funds it. The trustee manages the trust under the terms set forth by the grantor. The beneficiary (more than one are acceptable) receives the assets of the trust as directed by the trustee. Any of these parties may be either individuals or legal entities such as corporations. Attorneys and banks are often chosen as trustees. The trust is legally created when the trust document is drafted and signed by the grantor. The trust document should name primary and alternate trustees and beneficiaries, list the trust assets, provide rules for distribution to beneficiaries and describe the authority of the trustee (whether he may invest trust assets, for example). Some states provide their own forms, while others do not.
Revocability
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A trust will probably be considered revocable unless the trust document specifically states that it is irrevocable. Although the grantor of a revocable trust is free to keep all trust assets titled in his own name, if you intend to title them in the name of the trust, the trust document should specifically state that it is revocable. If you intend the trust to be irrevocable, you should title all assets in the name of the trust, state that it is irrevocable and prohibit revocation or modification of the trust by anyone, including you.
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Advantages
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The assets of a living trust do not go through probate when you die, meaning that your beneficiaries will have immediate access to them. You can avoid estate taxes that might otherwise be imposed on your estate upon your death by putting so many of your assets into an irrevocable living trust that your remaining assets fall within the estate tax exclusion. The amount of the estate tax exclusion varies annually, but is typically at least $1,000,000.
Revocation and Modification
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If you create an irrevocable living trust, you can neither amend nor revoke it. Even a revocable living trust becomes irrevocable upon your death. Some states allow an irrevocable living trust to be amended after the death of the grantor if the trustee and all the beneficiaries agree in writing. Even if you amend or revoke a revocable living trust, you cannot get back any assets that have already been distributed to beneficiaries.
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References
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