One of the most common questions we are asked here at EstateBee is what is a Living Trust ?
Simply put, it is a trust created by a person for the purpose of holding some or all of his or her assets in a manner that avoids probate.
The trust is created by entering into a living trust agreement. That agreement is made between a person in his or her capacity as creator of the trust (often called the grantor) and the same person in his or her capacity as manager of the trust (also called a trustee).
Once the trust has been created, the grantor transfers some or all of his or her assets to the trust. These assets are transferred in the same way that they would ordinarily be transferred from one person to another.
Then, once the assets have been transferred to the trust, the trustee of the trust (which happens to be the grantor) takes over management of the trust assets on behalf of the trust. In that way, the grantor can continue to enjoy use of the assets while in the trust.
Under the terms of your trust agreement, the grantor can stipulate how the assets in the trust will be transferred after his or her death. In this respect, a living trust is very like a last will and testament.
When the grantor passes away, the person he or she nominated as their successor trustee under their living trust agreement will be able to step in, take control of the trust assets and distribute them in accordance with the terms of the trust agreement. In doing so, the successor trustee is acting very similar to how an executor or personal representative under a will would act.
However, the big difference between living trusts and wills is that, with a living trust, the assets held by the trust do not pass through probate. This means that the successor trustee is free to distribute the trust assets without the need to get court consent and without the need to have the trust assets admitted to probate. This can end up saving time and money.
Now, hopefully, when someone asks you what is a living trust – you’ll be able to tell them 🙂
How Can EstateBee Help You?
For more information on what is a living trust and how to avoid probate, check out our book Make a Living Trust & Avoid Probate. It will explain what is a living trust and guides you step-by-step through the matters you need to consider when making a living trust. You’ll learn all you need to know about trusts, their advantages and disadvantages, the tax implications, the alternatives to living trusts and, of course, how to easily make your own. With detailed information, easy-to-follow instructions, helpful worksheets and all of the living trust forms necessary, we show both individuals and couples how to avoid the otherwise inevitable delays and costs of probate by preparing a revocable living trust and using other simple probate avoidance strategies.
For more information on what is a living trust or on any of our products, contact our customer service team who are here to help you.
James is an estate planning expert with over 15 years' estate planning experience. He is an accomplished author and writes extensively on estate planning matters.