What is a Living Trust?

A living trust is a legal document that is, among other things, a partial substitute for a will.  A living trust can provide broad and specific powers regarding most of you assets and is a key component of an estate plan.

Most of your assets – bank accounts, property, stocks, etc. – are typically placed into the trust, and are positively maintained for your benefit during the course of your life. When you pass, the assets in the living trust are passed on to your beneficiaries.

The initial trustee in charge of the assets is usually the person who creates the living trust. This is the easiest way to maintain full control of your assets throughout your lifetime. That said, it is also possible to name a successor trustee, which can be an individual or an institution, to manage the assets should you ever reach a point where you are unwilling or unable to do so.

The living trust may be known by other names, such as a revocable trust, inter vivos trust, or a grantor trust. The person(s) (often known as trustor, grantor, or settlor) (See our Glossary) who created said trust has the right to amend or revoke it any time they see fit, as long as they are still competent enough to do so.

The living trust agreement generally provides as follows:

• Provides you, as the trustee, the right to manage and control all trust assets as you see fit.
• Gives instructions on how the assets should be managed for your benefit during your lifetime.
• Names any and all beneficiaries (individual or charity) who will receive said assets at the time of your passing.
• Gives certain powers, guidance, and authority to the trustee to manage the assets. The trustee is generally someone who is held in the highest confidence and trust, and who is held to the strictest of standards. For example, the trustee is not allowed to use the assets in the trust for their own personal use, and must instead do all they can to ensure that all is done to benefit the beneficiaries of the trust.

A living trust is an important element of your overall estate planning, and may in fact be the most important part due to the broad powers and instructions that trust instruments can provide.