How does a trust work?
A trust is a document that you create during your lifetime to manage and distribute your assets. It can be revocable or irrevocable, with the most common type being a revocable living trust. Here’s how it works:
1. Creating the Trust
Grantor (Creator): You (the person setting up the trust) are the grantor or settlor.
Trust Document: You create a legal document outlining the terms of the trust, including who will manage the trust (the trustee) and how the assets will be distributed to beneficiaries.
Assets: You transfer ownership of certain assets (like real estate, bank accounts, investments, etc.) into the trust. The trust holds these assets for the benefit of the beneficiaries.
Trustee: You appoint a trustee who will manage the assets. During your lifetime, you are the trustee and maintain control of the assets.
2. How It Works During Your Lifetime
Control: If it’s a revocable living trust, you can change or revoke the trust at any time while you are alive. This means you can add or remove assets, change beneficiaries, or even dissolve the trust altogether.
Management: As the grantor and trustee, you retain full control of the assets. If you become incapacitated (unable to manage your affairs), the successor trustee you appointed can step in and take over the management of the assets.
Living Trust and Incapacity: If you become mentally or physically incapacitated, the successor trustee takes over managing the trust on your behalf without the need for a court-appointed guardian or conservator.
3. Distribution After Your Death
No Probate: After your death, the assets in the living trust do not go through probate, which is the court process of validating a will and distributing assets. This can save time and avoid public disclosure.
Trustee’s Role: The successor trustee takes over the management of the trust and distributes the assets to the beneficiaries according to the terms of the trust. The process is typically faster and more private than the probate process.
Avoiding Disputes: Since the living trust outlines exactly how assets are to be distributed, it can reduce the likelihood of disputes between family members or beneficiaries.
Key Takeaways:
A living trust is a flexible estate planning tool that allows you to manage and distribute your assets during your lifetime and after your death.
It avoids probate, provides privacy, and can be useful in case of incapacity.
A revocable living trust can be altered or revoked during your lifetime, while an irrevocable living trust typically cannot be changed once established.
Ultimately, a living trust can be an effective tool for managing your assets and ensuring a smoother transition to your beneficiaries. Ready to get your trust-based estate plan in order? Start by booking a Peace of Mind Planning Session with a Bergman & Lee attorney. You’ll share your concerns, and we’ll present your options, our packages, and our unique flat fees. Then, if we decide we are a good fit to work together, we’ll take next steps. You can book your Peace of Mind Planning Session HERE. Mention this blog and we’ll waive the $450 session fee!
