A Living Trust is an entity which is generally created for estate planning purposes. A “Settlor” transfers assets to a “Trustee” who holds and administers the assets pursuant to the terms of a contract called a “Trust Agreement” or “Declaration of Trust.” The Settlor(s) can be, and often are, the Trustee(s). The Trust document sets forth various provisions including the powers of the Trustee(s), the disposition of the assets of the Trust, and the identity of successor Trustees.
The Trustee(s) normally have the same powers over the property as an individual owner does so that a person’s ability to manage his or her assets is not impaired. Usually, the Trust assets (and income therefrom) are available to the Settlor(s) during the lifetime of the Settlor(s). Upon the death of the Settlor(s) the Trust document states how the assets should be distributed. The assets can be distributed outright – free of trust – or held in Trust as desired for each beneficiary. In the Trust document, the Settlor(s) states the person(s) or entity who will serve as Trustee(s) upon the death or incompetence of the Settlor(s). This can eliminate the need for a conservator of the estate of the Settlor(s).
The use of a Trust in an estate plan can eliminate the need for assets to go through a court probate of the assets. This saves time and money in most instances, although now there is a requirement that heirs and Trust beneficiaries be given notice and a specific amount of time to contest the provisions of the Trust.
It is important to note that the assets must be properly placed in the Trust for the Trust to function as intended. This generally means that the title to the property of the Trust must be transferred into the Trust name. The owner of the property would be, for example, “John Jones, Trustee of the Jones Family Trust.”
Please e-mail questions or future blog post ideas to Debra@CrawfordandCrawford.com. This blog is intended to be informative and thought provoking and is not to be relied upon as legal advice in any particular situation.
(Reprinted with Permission from Carmel Valley Newsletter. Thanks Jamison!)