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Living Trust Attorneys Explain Trust Basics

living trust attorneys

living trust attorneysAlthough your Last Will and Testament may serve as the foundation for your estate plan, you will likely incorporate numerous other estate planning documents and tools into your plan as well in order to achieve all of your estate planning goals and objectives. One of the most popular estate planning tools is a trust agreement. Trusts have increased in popularity over the last several decades, due in large part to the flexible nature of a trust which allows a trust to help achieve a wide variety of estate planning goals. For those who are unfamiliar with trusts, the living trust attorneys at Morris Hall PLLC explain some trust basics to get you started.

What Is a Trust?

A trust is a relationship whereby an asset (money, real estate, car…) is held by one party for the benefit of another. A trust is created by a Trustor (also referred to as a Maker or Grantor) transferring assets to a Trustee. The Trustee holds that property for the trust's beneficiaries.

Testamentary vs. Living Trusts

All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Trustor’s Will.  A living trust is a trust that takes effect as soon as all the legalities of creation are in place.

Revocable vs. Irrevocable Trusts

Living trusts are further divided into revocable and irrevocable trusts. As the name implies, a revocable living trust is one that can be modified or revoked by the Trustor at any time and without the need to provide a reason. An irrevocable living trust, once it takes effect, cannot be modified or revoked by the Trustor for any reason. Typically, an irrevocable trust can only be changed or revoked by court order.

Testamentary trusts are all revocable because they do not even go into effect until the death of the Trustor at which point they are triggered by a Will that can always be changed prior to the death of the Trustor.

The Role of Trustee

The Trustee of a trust is appointed by the Trustor. Many people make the mistake of simply appointing a spouse or close friend without taking the time to really understand what a Trustee does to determine if that individual is really right for the job. Just a few of the numerous and varied duties and responsibilities of a Trustee include:

  • Managing and investing trust assets using the prudent investor standard
  • Administering the trust according to the trust terms created by the Trustor
  • Keeping detailed records of trust business
  • Communicating with beneficiaries and resolving disputes among them
  • Distributing trust assets according to the trust terms
  • Preparing and paying trust taxes each year

Trust Terms

One thing that makes a trust such an attractive estate planning tool is the flexibility offered by the trust terms. As the Trustor of the trust, you can include almost any terms you wish, as long as they are not illegal, impossible, or unconscionable. If you wish to include a term that says the trust assets can only be used for educational purposes, you can do that. If you want the funds distributed on a specific day each year you can do that as well. Creative use of trust terms can help to foster all kinds of beliefs and philosophies. If family is important to you, a trust term might require a beneficiary to be married or have children before being entitled to disbursements from the trust fund. Conversely, if you don’t want beneficiaries to start a family too early, you could encourage entrepreneurship or continued education with your trust terms as well. The wide latitude a Trustor has when creating trust terms is one reason trusts are so popular.

Contact Living Trust Attorneys

For more information, please join us for an upcoming Complimentary seminar. If you have additional questions or concerns about living trust, or how one might fit into your estate plan, contact an experienced living trust attorney at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.

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