What is a living trust?
Most common form of trust protects assets from costs of probate
The most commonly used trust for estate planning purposes is the Intervivos Trust, often called a living trust.
A living trust is a tool used to transfer assets to named beneficiaries either upon the death of, or at some future point in time, of the person(s) who established the trust – known as the settlor. The primary advantage of a living trust is avoiding the high costs of the probate process.
This type of trust is revocable during the settlor’s lifetime and can be amended at any time. It generally becomes irrevocable upon the settlor’s death. Under a living trust, the settlor, in their role as trustee retains ownership and control of the trust, the terms and conditions of the trust, and the assets placed in the trust during his lifetime.
Benefits of the living trust
Settlors like the living trust because of its flexibility. Most often the settlor is the initial named trustee. If used for married couples who share in the ownership of the family assets, the husband and wife are the settlors and trustees.
Upon the death of one spouse, the surviving spouse remains the trustee until he or she lacks capacity to act as a trustee or dies. Successor trustees are named in the trust for when the settlor is no longer able to act as trustee, either due to incapacity or death.
For a living trust to be valid and enforceable, it must be funded. Trust funding occurs when assets are transferred to the trust. Assets can be added to the trust at any time but if no assets are part of the trust at the death of the settlor, the trust is considered to have failed and would not be enforceable. Any assets which are held in the settlor’s name — as opposed to being controlled by the trust – will be part of the probate estate at the time of his death; such assets would not be protected by the trust.
Versatility of living trusts
Living trusts can have additional but separate trusts of other types incorporated within based on the needs and wishes of the settlor. Oftentimes, settlors want to have marital trusts, children’s trusts, pet trusts, or special needs trusts terms included so beneficiaries can be taken care of without having complete control and access to the trust assets.
The trust assets remain under the trustee’s control until a specific point in time or certain life events occur. This is especially important when the living trust is established for beneficiaries who do not have the ability to manage their own finances. For example, adding a children’s trust to the living trust will protect minor or young children from their own youth and folly should they come into trust assets before they are mature enough to handle that responsibility.
A living trust, along with other estate planning tools, can protect assets from probate and properly distribute assets to loved ones after an individual passes away. The process of creating a living trust can be complex, and specific rules must be followed to ensure the trust is valid. Seeking the advice of an experienced estate planning attorney is the first step in making these important arrangements for your estate and loved ones.
Do you have questions about a living trust or estate planning strategies to protect your financial interests and provide security for your loved ones? Contact Estate Planning Attorney Barbara Craig to schedule a free consultation. Serving clients in the South Bay area including Torrance, San Pedro, Lomita, Harbor City, Carson, Wilmington, Long Beach and other nearby communities.
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