Who Can Inherit Under a Living Trust?
Living trust and inheritance are two separate issues. A living trust is an instrument created during the life of a property owner, known as the settlor. Inheritance occurs when a deceased individual died without leaving some instrument to detail what will become of his property. Each state's law specifies which parties can benefit from living trust and inheritance.
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Inheritance
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The act of inheritance only applies in one specific situation: when someone has died without a will, trust or other legal instrument that explains what he wants done with some or all of his property. In such a situation, the law will typically grant some share of the property to any surviving spouses and underaged children of the deceased, and then distribute the property via "inheritance" to the heirs of the deceased.
Valid Heirs
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The precedence of heirs varies with state law; usually, however, the first in line are the descendants of the deceased, followed by the deceased's parents and their descendants. Typically, the first generation of descendants at which there's a living heir will divide the inheritance among some or all members of that generation. Most states have some form of "slayer statute," a law that prevents heirs from inheriting property if they intentionally helped to cause the death of the deceased. Such "slayers" are no longer considered valid heirs; the law will generally treat slayers as though they died before the deceased.
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Living Trusts
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Unlike inheritance, a trust is an actual document created by a living person, which immediately transfers the settlor's property to another party (the "trustee"). In the document, the settlor specifies one or more individuals, known as "beneficiaries." The trustee then has a legal obligation to manage the property for the good of the beneficiaries as directed in the trust. A living trust, also known as an "inter vivos trust," is a trust that begins to operate while the settlor is alive. Typically, the settlor may choose to modify or revoke the living trust at any time before his own death, unless he specifies the trust is irrevocable.
Valid Beneficiaries
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A trust must have at least one beneficiary, or the trust will fail and become inoperative. Typically, a settlor can name as beneficiary any person legally qualified to hold and take title to property. Most state laws allow corporations to be beneficiaries, and many jurisdictions also allow a trust to benefit an unincorporated association. The beneficiary need not be living at the time of the trust; for example, the settlor can establish a trust for unborn children. U.S. law currently does not recognize animals as eligible trust beneficiaries.
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