A living trust is a legal document that allows a person to retain control over their assets while living and then transfer them upon death to beneficiaries of their choosing. If you’re wondering how a living trust works, this guide will explain some of the basics and the steps involved in making one.
How a Living Trust Works.
A living trust is a legal document created by you, the grantor. It’s also known as an “inter vivos” or “revocable” trust. With a living trust, you can dictate how your estate will be managed during your lifetime and how it will be distributed upon your death. You can choose to name yourself as the trustee—the person in charge of managing the trust—or someone else you trust to be in charge of it.
Most people create a revocable living trust. That means they can make changes as circumstances change. For example, maybe you reconsider who should become trustee after you die. Or maybe you have a falling out with one of your kids and you want to reduce their inheritance.
An irrevocable trust is one that you cannot change. (However, there are still various ways of changing the trust. An estate planning attorney can help you with that.)
What Does a Trustee Do?
A trustee is a person you entrust to manage and administer the trust. Trustees are responsible for carrying out the terms of your trust as directed in the trust document. This may include making payments from trust assets to your beneficiaries, investing trust assets, filing taxes on behalf of the trust, and distributing assets according to your instructions in the event of your death or disability.
Who Are the Beneficiaries?
Beneficiaries are the individuals and organizations that you designate to receive money or other kinds of assets from your trust. The beneficiaries can be family members, friends, charities, or other organizations. Designating beneficiaries is an important part of setting up a living trust, as it ensures that your wishes will be carried out according to the terms of your trust.
Why Is Funding The Trust So Important?
After creating a living trust, the next step is to fund or transfer assets into the trust. Funding your trust is important because if the assets aren’t transferred, they won’t be included in your trust and can’t pass on to the beneficiaries upon your death. It is also important to correctly title any assets that are meant to be held in the living trust. In some cases, this may require hiring an attorney to retitle assets such as real estate.
When Can the Trust Be Changed or Amended?
A living trust can be amended or changed while the grantor is alive. This can be done with a written amendment. The amendment should be signed and dated and clearly set forth the change. After the grantor dies, a living trust can only be amended as allowed in the original trust document, or as allowed by state law.
Still Have Questions About How a Living Trust Works?
Give us call at 602-443-4888. Founding attorney Paul Deloughery has been helping people understand how a living trust works since 2001. We’re here to help.
