|Posted on April 12, 2014 at 9:10 AM|
A trust is a legal entity to which a person (called a “grantor,” “settlor,” or “trustor”) transfers property to be administered by a trustee for someone’s (a beneficiary’s) benefit. The term “living trust” (sometimes also called an “inter vivos” trust) means that the trust was created during the grantor’s life. This is in contrast to a testamentary trust—a trust created in a will. Because a will has no effect until a person dies, a testamentary trust does not come into existence until after the death of the person who created it (the testator). Since most living trusts can be amended or revoked at any time during the grantor’s lifetime, living trusts are also commonly called “revocable trusts.”
A living trust is created by a written declaration of trust or a written trust agreement which contains directions about how the trust is to be administered and distributed. A document creating a living trust can be as short as one page or can it can contain many pages, depending upon the simplicity or complexity of the directions that the grantor includes in the document.
It is common for the grantor, trustee and beneficiary of a living trust to be the same person at first. This allows the grantor to maintain the same control over assets in the trust as he or she had before transferring assets into the trust.
A living trust can name one or more successor trustees (which could be a spouse, a child, or a trust company) to administer the trust in case of the grantor’s incapacity. It can also provide for an ultimate plan of distribution in the event of the grantor’s death. One of the advantages of a living trust is the control and continuity it offers in being able to use a single trust document to manage a grantor’s assets during the grantor’s lifetime and to continue to manage and distribute assets in the trust after the grantor’s death.
If the trust is funded during the grantor’s life, the assets can be transferred to the beneficiaries named by the grantor in the trust document. The ultimate distribution of property under a living trust is similar to what can be done in a will, but without having to go through the “probate” process.