Effective estate planning requires you to understand the terms used for the various estate planning documents, but a living trust lawyer, like from Yee Law Group, can help. Trusts, especially revocable living trusts, are very common in estate planning, yet some people may not understand what they are or what they do. An explanation of what each of the words means may help you to better understand a revocable living trust and whether you and your family may benefit from one.
A trust is a legal arrangement that creates a relationship among at least three parties. The person who creates the trust is sometimes also known as the grantor or settlor. The person who eventually receives the assets contained in the trust or the income it generates is called the beneficiary because he or she benefits from the creation of the trust. A trust can have more than one beneficiary. The third party to the arrangement is the trustee, whose responsibility it is to manage the assets in the trust and distribute it to the beneficiary or beneficiaries according to the terms set forth at the trust’s creation by the grantor. Because the trustee must put the beneficiaries’ interests first, he or she plays a fiduciary role in the trust arrangement.
A living trust is also called an inter vivos trust. When you create a living trust, it means that it goes into effect while you are still alive. As long as you remain alive, you can retain control over the assets held in trust. However, once you die, the assets then become the responsibility of your named successor trustee to manage. This is different from other trusts in which once an asset is titled to the trust, you no longer really own it.
A revocable trust is one that can be changed, i.e., revoked. This is in contrast to an irrevocable trust which, once created, cannot be modified or cancelled. As long as you are alive, you have the ability to make changes to the terms of your revocable living trust or to cancel it all together.
However, the nature of a revocable living trust changes upon your death. At that point, because its creator is no longer alive, the trust becomes irrevocable and the assets become the responsibility of your designated trustee.
A revocable living trust is a useful estate planning tool. However, it does have limitations and may not suit your purposes. An attorney can explain your estate planning options to you. Contact a law office to schedule a consultation.