What Is a Living Trust? How Does It Differ from A Regular Trust?
May 1, 2020
Trusts have existed for hundreds of years. Originally, they were intended for people like the Rockefellers and the Kennedys to enable the makers of the trust, called the trustors, to do things like prevent their heirs from getting their share of the fortune all at once. Trusts have five ingredients:
The trustors, who make the trust,
The trustee, who runs the trust,
The Beneficiaries, who get the benefits of the trust,
The trust instrument, which defines the terms of the trust, and
The trust property.
Starting in the 1960s, trusts also became a means of avoiding probate by way of what is commonly called, “a living trust.” In a living trust, the trustor creates a trust wherein the trustor is the trustee and the beneficiary during his or her lifetime. Everything the trustor owns is put into the trust and somebody is designated as the successor trustee after the trustor’s death. That means that the trustor keeps total control over his or her (or their) assets while alive and able to function. Then, when the time comes, the new trustee takes over and is required to do what the trust says. This usually means transferring the trust assets to the beneficiaries.
This avoids probate because probate is the traditional means of disposing of the decedent’s property and, with a properly done trust, the decedent technically doesn’t own anything. It’s all owned by the trust and is disposed of by the trustee according to the trust terms. This is more economical than probate, sometimes by orders of magnitude, and provides flexibility. If you want to do anything with your estate after death except give the heirs their shares in one lump sum, a trust is the only way to do it.
The statements herein are general and may not apply to specific situations. If you have a specific legal issue, contact an attorney.
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