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 A
legal document that allows an individual (the grantor or trustor) to create a trust and appoint someone else as trustee (usually a trusted individual or bank) to carefully invest and manage his or her assets.
A living trust, created while you're alive, lets you control the distribution of your estate. You transfer ownership of your property and your assets into the trust. You can serve as the trustee or you can select a person or an institution to be the trustee. If you're the trustee, you will have to name a successor trustee to distribute the assets at your death.
The advantage of a living trust? Properly drafted and executed, it can avoid probate because the trust owns the assets, not the deceased. Only property in the deceased's name must go through probate. The downside? Poorly drawn or unfunded trusts can cost you money and endanger your best intentions.
It is called a living trust because it is created during the grantor's lifetime, and takes effect during the grantor's lifetime. By contrast, a will does not take effect until after death.
Perhaps the biggest advantage of a living trust is that it does not have to go through probate, as does a will. However, there are other estate planning devices which avoid probate, such as a joint tenancy, a life insurance policy, and in-trust-for bank account (also known as a Totten Trust), and individual retirement, pension or Keogh accounts.
In addition, living trust salespeople often overstate the cost of probate and the length of time it takes to probate a simple will.
A living trust can provide for the private management of your assets if you choose not to act as trustee, or when you are unable to do so, by the person or persons whom you appoint as trustee. When you are incapacitated, your trustee can assume responsibility for your assets in an accountable fashion, and manage them for your benefit without direct court intervention or supervision. At your death, the trustee acts much as an executor would, gathering your assets, paying valid debts and claims and taxes, and distributing your assets as you have directed in your living trust. |
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