The Living Trust

A Living Trust (sometimes called a “Revocable Living Trust,” or just a “Trust”) is an estate planning tool that is mostly used to control the distribution of one’s assets when he or she dies in much the same way as a Will. In fact, a Living Trust, if used properly, can completely alleviate the need to probate a Will at death. While it is still necessary to have a Will even when a Living Trust is established, one of the primary purposes of a Living Trust is to attempt to avoid probate.

The Living Trust works like this: When the Living Trust is established, the Grantor of the trust (sometimes called the “Settlor” or the “Trustor” – this is just the person who establishes the trust) creates a separate “legal entity” called a trust. The trust is a recognized existence in the law that can act as a separate, individual body. A trust might be compared to a corporation. Like a corporation, the trust can hold property, accounts, etc. “in the trust’s name” and take title (ownership) to these assets. Once the Grantor transfers any of these assets to the trust, the Grantor no longer owns such assets; the trust owns them.

So, if the Grantor establishes a trust and transfer’s all of his or her assets to the trust, when the Grantor dies, he no longer has any assets that must be distributed through his or her Will. By doing so, the Grantor has thus avoided probate with regard to the transferred property.

We will continue to explore Living trusts in future posts to the blog. We’ll look at the benefits and problems with Living trusts as well as important factors and considerations in establishing trusts. Finally, we’ll look at the alternatives to creating living trusts and discuss ways to establish a trust.