Many people have heard about Revocable Living Trusts (Trusts) and that they may be some benefit from having one, however, many are not really even sure what a trust is or how it works. A good approach to understanding a Trust is to consider each word individually and what it means.
Revocable – Means that the creator of the trust is able to revoke it, amend it or terminate whenever it no longer suits their needs.
Living (Inter vivos) – Distinguishes it from other types of trusts in that it is living. Meaning it is effective and operational the moment you sign it. In essence, it is a living entity that can own, buy, sell and trade assets.
Trust – Is the name of an agreement whereby one person agrees to hold and manage property belonging to another. This concept was frequently used in the time of the crusades when the owner (Grantor) would go off to battle and deed his estate to another (Trustee). According to the terms of the trust agreement, the Trustee was to manage the property while the Grantor was gone and then deed the property back to the owner upon his return.
Now that we have identified what a trust is, let’s get a better understand of what are the main components of a trust?
1st The Grantor – The Grantor is the owner of the property and the creator of the trust. Typically if you are the Grantor, no one else will ever be the Grantor. As the creator of the trust, you are the only one who can revoke it but you are also able to amend it as time goes on and as your estate plan changes.
2nd The Trustee – The Trustee(s) manage the trust. Most Grantors will choose to be the initial Trustee and then make provisions for successors as trustees.
3rd – The Beneficiary – Initially, the Grantor is the only beneficiary and will typically continue to be the beneficiary up until the time that they pass away. Upon the death of the Grantor, the trust will make provisions for distribution to the beneficiaries chosen by the Grantor. A common example is to distribute equally to surviving children or a favorite charity. In this respect, a trust functions in a very similar manner as a will.
It is not comfortable to plan for our own death or a day when you may be incapacitated; however, wise planning can often save time, money and aggravation for you and your family. A Trust is certainly not for everyone, but for many, it has proven to be a valuable planning tool.
Estate Planning and Probate Attorney
Widerman Malek, PL
