Living Trust, Part 2

Last week, we discussed the basics of the “Living Trust.” <Link to prior blog post> As discussed in the prior post, the Living Trust works by creating a separate entity to hold property, which, upon the Grantor’s death, will not be required to go through probate (if the trust is properly set up and the property is properly transferred to the trust). 

By the way, when we talk about “property” we are referring not just to real estate, but also to “personal property” (like automobiles, furniture, etc.). In fact, even accounts, money, stock, intellectual property, and many other types of property can be moved into a trust. 

After reading last week’s post regarding Living Trusts, you may have cringed at the thought of giving all of your assets to a trust and no longer “owning” anything in your own name. Most Living Trusts have a built-in system in place to handle this issue: they are “revocable” during the life of the Grantor. Being “revocable” means that the Grantor retains the right to, at any time, cancel the trust (entirely or partially) and/or transfer any or all of the assets back to the Grantor. Also, in many cases, the Grantor actually acts as the “Trustee” of the trust. The Trustee is the person “in charge” of the trust. So, from a practical standpoint, during the life of the Grantor in a typical Living Trust, little is changed in day to day activities using the property in the trust. The trust may technically have legal title to the property, but the Grantor uses the property freely (and if the Grantor wants, he or she can revoke the trust too).

So you can see that, with a Living Trust, although the assets transferred to the trust have been legally “re-titled,” the Grantor retains the use of these assets as if he or she were still the owner of them.

Next week we will explore some of the problems with the Living Trust and some of the ways to deal with these problems in the creation of these powerful estate planning tools.