Revocable Living Trust
A Trust is the key component to your estate plan. A Trust is a document wherein the creator (Settlor or Grantor) transfers ownership of specific assets from themselves to another entity, to wit, their Trust. A revocable living Trust (also called a "living trust" or "revocable trust") is just one type of Trust.
It's referred to as a "living" Trust because you create it while you're alive. Similarly, it is "revocable" because you can also amend or revoke the Trust at any time, for any reason.
A Trust involves three parties:
- The Settlor or Grantor is you, the person who creates the Trust.
- The Trustee is the person who agrees to accept your assets and manage it as the Trust agreement directs. While you are alive, you are usually the Trustee as well. You also name “Successor Trustees” who manage and distribute Trust assets after your death.
- The Beneficiaries are those who will receive your assets after your death, as directed by the terms you specified in your Trust.
Who can be the Trustee?
Any competent adult may be a Trustee. Usually, you name yourself, or you and your spouse, as the initial Trustee while you're alive because you want full control of the property while you're alive. Some people, however, select their children, relatives or trusted friends to serve as Trustees.
What can a Revocable Living Trust do?
- Provide for minor children when you die - In a living Trust, you can make provisions for your spouse and children in any fashion you choose, including paying portions of your estate to children over time (i.e., 25% of the estate when your child attains 21 years of age, 25% of the estate when your child attains 25 years or age, and the balance, plus any accrued interest, when your child attains 30 years of age).
- Avoid Probate - Property in your revocable living trust doesn't go through Probate after your death. One advantage of avoiding Probate is expedited distribution (probate takes 12-36 months, or more, whereas a Trust takes 1-3 months).
- Provide property management if you can't manage your affairs - If you become too ill or disabled to manage your property, your Trustee or Successor Trustee will do this for you. With no Trust in place, you would need a Conservator to be appointed by the court. You avoid the trouble and expense of setting up such arrangements if you have a living Trust.