A living trust is created, placed in force and is operational during a person's life. The person who wishes to create the trust is called a Trustor (you) and will determine how the trust will operate. The Trustor appoints a person (a trustee) who will manage the assets in the trust during the Trustor's lifetime. In most cases the trustor appoints himself/herself to be the trustee. The Trustor will also list a beneficiary or, the person(s) who will benefit from the trust during the lifetime of the trustor. Again, the Trustor usually appoints himself as the
beneficiary. The Trustor will appoint someone to be a successor trustee. A successor trustee is someone who will take over managing the trust assets when the initial trustees become either incapacitated and can't act, or they pass away. Finally the Trustor will appoint final beneficiaries and of course they are the people who will benefit from the trust when after the death of the Trustors. A married couple will usually act as co-trustors, co-trustees, and co-beneficiaries. When the first trustor dies, the survivor will continue to act as the surviving trustor, surviving trustee, and surviving beneficiary. When the survivor dies, the successor trustee gains authority and follows the instructions of the trust to finalize the estate and transfer assets to the final beneficiary.
This is how a trust is commonly works and is arranged but that are other variations which could happen. There are simply too many variations to list here.
A Testamentary Trust is created during a person's lifetime, usually through a Will. However, the trust does not become active nor are assets transferred into the trust until after the creator's death. This means that all assets which will be placed in the Testamentary trust will remain titled in the name of the creator. Therefore at death, the assets must go through probate before they are placed in the trust.
Two more terms commonly used when discussing trusts are, "a revocable trust" and an "Irrevocable Trust." Both trusts are "living" or "inter vivos" trusts. This means they are both created and operated during a person's lifetime. A revocable trust will include provisions written into the trust which will allow the Trustor to make changes and even cancel the entire document (revoke the trust). Should this be done, the assets that were titled in the name of the trust would be re-titled back into the name of individual. The exception to this flexibility is that in the event the creator dies or becomes incompetent, most revocable trusts will have a provision which makes the trust irrevocable and unchangeable.
An irrevocable trust simply means that the Trustor cannot cancel (revoke) the trust by himself/herself. Initially it may seem that this form of trust is quite restrictive and even undesirable but that is rarely the case. This form of trust is powerful and when properly drafted, most people wishing to own a trust will choose this form once they understand the facts.
A common belief or question from people unfamiliar with trust documents is, "If I create a trust, will I lose control of my assets?" Of course the answer is NO! If a trust is properly drafted, your financial decisions concerning your assets will not change from how you made those decisions before you had a trust. As the creator of the trust, a trustor will rarely appoint anyone other than themselves to act as trustee (the person who manages the assets titled in the trust).
There are many different types of trusts but they will all fall under one of two headings. Either the document will be a "living trust" (also called an inter vivos trust) or a "testamentary trust."
For many people, talking about trusts can be confusing, but not talking about them can be devastating! A trust is simply another way for a person to hold title to their real property and assets. The intent of owning property through a trust is to protect assets from unintended creditors, maintain control of your assets during a disability, reduce or eliminate certain taxes, expenses and fees, avoid probate at death and more. Depending on what you want to accomplish when creating the document will determine what type of trust is drafted by the attorney.