Living Trust
Living Trust Forms
A living trust, also referred to as an inter vivos trust, is a trust designed to avoid probate while providing long-term property management. The term living trust implies that the trust is revocable by the settlor (creator) or grantor. Revocable living trusts can be terminated or changed at any time during the grantor's lifetime. A living trust allows the grantor (owner), who usually appoints himself or herself as trustee, to exercise complete control over trust assets during his/her lifetime and, upon the death of the grantor, allows trust property to pass to beneficiaries without going through probate, resulting in substantial savings and preservation of wealth.
To establish a living trust, a document called a declaration of trust is prepared and executed. A declaration of trust sets forth the terms and conditions of the living trust. Assets are then transferred from the grantor to the trustee of the living trust, a position customarily held by the grantor. Effectively, the transfer of assets is made from the grantor to himself or herself as trustee of the living trust. The grantor, acting as trustee, then administers the living trust for his or her own benefit as well as the benefit of at least one other person, a beneficiary. Though the living trust is managed for the benefit of beneficiaries as well as the grantor, beneficiaries get nothing until the grantor dies. Upon the grantor's death, the successor trustee becomes the trustee and passes living trust property quickly and confidentially to the beneficiaries without probate.
Transferring assets into a living trust is referred to as funding the trust. Real estate is transferred into the living trust by executing and recording a deed naming the living trust as grantee. Since probate is required in any state in which the deceased held title to real property, transferring real estate held in another state to your living trust may avoid probate in that state. Other assets such as bank accounts, retirement accounts, life insurance policies and brokerage accounts must be transferred as well. It is important that the required paperwork be done to properly transfer assets into the living trust. Due to the potential tax consequences of changing beneficiary designations on retirement accounts, it is advisable to seek the advice of a tax professional before doing so.
Assets not transferred to a living trust are subject to probate upon a person's death. Probate is the legal process by which assets are transferred to the beneficiaries listed in a last will and testament or, when there is no last will, as dictated by law. While a living trust enables private transfer of assets, probate can tie up assets for an extended period of time, a minimum of six months. Unlike assets in a living trust, assets subject to probate are public knowledge and come under the scrutiny of the court. For assets not in the living trust at the time of death, use a Pour-over Will to transfer them into the trust. A Pour-over Will is used to transfer or "pour" into the living trust all property not specifically transferred into the trust prior to the grantor's death. A Pour-over Will does require a probate proceeding to transfer the property to the living trust, however, in many states, a small estate procedure can be used in lieu of probate if the property outside of the trust is valued at less than $100,000.
Another use of a living trust is as an asset management tool during periods of incapacity or disability. While the trustee, usually the grantor, is incapacitated, the successor trustee of the living trust would manage the trust assets. The role of the successor trustee, appointed in the declaration of trust, is to assume the duties of trustee and mange trust assets when a predetermined event such as incapacity or disability occurs or upon the death of the grantor, assumed to be the original trustee. Upon the grantor's death, the successor trustee manages and distributes the living trust assets for the benefit of the trust beneficiaries based on the terms and conditions in the declaration of trust. In contrast, if there were no living trust, a spouse or domestic partner would manage joint or community property during a period of incapacity while separate property would be subject to a conservatorship proceeding. In a conservatorship proceeding, a determination that a person is unable to manage his or her finances would result in the appointment of a "conservator" to manage their assets.
Living trusts do not provide benefits to all people. For instance, a young couple, without children, planning to leave their assets to each other in the event of death would not gain a significant benefit from a living trust. Also, anyone without significant assets or that wants court supervision of their estate would not benefit from a living trust. In general, the greater the value of one's assets the more he or she benefits from a living trust.
Our living trust includes provisions for assets, disposition of assets, beneficiaries, trustee duties, administration without court supervision as well as a completed example and instructions. The trust accommodates all types of beneficiaries, including minor children. [Living Trust FAQ].
Instantly download and customize a living trust on your computer screen.
Last Modified: October 2009
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