A trust is created when a person (called the Trustor, Settlor or Grantor) transfers to another person or corporation (called the Trustee) a property interest to be held for the benefit of himself or others (the Beneficiaries.)
If the Trust is created during the Trustor's lifetime it is an Inter Vivos or Living Trust. When the Trustor retains the right to dissolve the trust arrangement, it is called a Revocable Living Trust.
The Grantor and the Trustee are often the same people. This is very typical in most living trusts. If you establish the Trust, you are the Grantor (or Trustor).
Since most of us want to continue managing our assets, we will also continue to act as the Trustee of this Living Trust for as long as we are alive and capable. However, in the event of our death, or our mental incompetency, the trust provides for a successor trustee to step in and manage the trust on our behalf or for the benefit of our children or other heirs.
Think of a Revocable Living Trust like a personal safe. In this safe you place all of your valuable assets. You have the combination to the safe so you can add or take out assets as you choose. Upon your death you give that combination to someone else that now has access to your assets and has the responsibility to distribute your assets according to your written instructions.
What are some of the advantages of a revocable living trust?
A Living Trust avoids probate, not only the expense of probate, but the delay as well. This is the most common reason for a Living Trust.
It also provides privacy. For some people, this is a very important factor. Probate files are a matter of public record. Living trusts are private and are not available for others to see. Therefore, the size of your estate, as well as the beneficiaries or your estate, will not become a matter of public record.
The Living Trust also permits you to provide for professional management of your assets. Even while you are still alive, you may choose to engage the services of a professional trustee to manage your assets for you. This may give you more time to do the things which you really enjoy -- like traveling. Also, if you suffer from a stroke or other mental or physical disease, the Living Trust can be an excellent substitute for a conservatorship.
Another advantage is that the living trust will help eliminate delays which occur when there is a probate and provides a smooth transition. In other words, assets held in a Living Trust can be sold by the successor Trustee immediately after a person dies, if that is appropriate.
Likewise, assets can be immediately distributed to the heirs, assuming they have obtained the ages set forth in the trust document. Of course, if there are potential debts of the decedent or death taxes which may be due, the prudent Trustee will hold back sufficient funds to pay these expenses.
The Living Trust eliminates the need for court accountings which are otherwise required in a probate estate as well as guardianship estates for minors.
If you choose a successor trustee who lives in another state, you will not need court approval for his or her appointment.
