Fundamentals of living trusts

Third in a Series on Living Trusts and Wills from CALDA (California Association of Legal Document Assistants)

A living trust will be used as the mechanism to manage your property before and after your death as well as provide how those assets, and the income earned by the assets, will be distributed after your death. If you should become incapacitated or disabled, a successor trustee whom you have named will manage the affairs of the trust for you as beneficiary. A living trust is not subject to probate and, therefore, all provisions of the trust will remain private.

The “living trust” described in this article is a revocable living trust. It is sometimes referred to as a revocable inter vivos trust, or a grantor trust. A living trust may be amended or revoked by the person creating it (commonly known as a “trustor,” “grantor” or “settlor”) at any time during the trustor’s lifetime as long as the trustor is competent.

A trust is a written legal agreement between the individual creating the trust and the person or institution named to manage the assets held in the trust (the “trustee”) for the benefit of the trust’s beneficiary. In most cases, you will be the trustor, the initial trustee of your living trust and the beneficiary of the trust, all at one time. If, at some point, you need assistance in managing the trust the successor trustee will manage the trust for your benefit as the beneficiary.

In a living trust agreement:

• The trustee has the legal right to manage and control the assets held in the trust.

• The trust describes the persons or charitable organizations (“beneficiaries”) who will receive the trust assets after the initial beneficiary’s death.

• The trustee is given guidance and certain powers and authority to manage and distribute the trust property in a prudent fashion. The trustee is a “fiduciary.” A fiduciary is an individual or company who occupies a position of trust and confidence and is subject to strict responsibilities, usually higher standards of performance than one who is dealing with his or her own property. Without the trustor’s express written permission the trustee cannot use trust property for the trustee’s own personal use, benefit or self-interest. A trustee must hold the trust property solely for the benefit of the beneficiaries of the trust.

Three basic types of revocable

living trusts include:

• A probate-avoidance trust for an individual

• A probate-avoidance trust for a couple who own property together

• A probate-avoidance and estate tax-saving AB trust for prosperous couples, typically couples with a net combined estate worth over $5 million (according to current law)

A living trust can be an important part, in many cases the most important part of your estate plan. Not everyone, however, may need a living trust. The greater the risk of incapacity or death, the greater the need for a living trust. The greater the value of your assets, particularly if they include real estate, the greater the need for a living trust. A young, healthy individual with few assets probably does not need a living trust right now. Nor does the real estate developer who is frequently buying, selling or refinancing his or her real estate holdings want a living trust to hold those assets. On the other hand, many people recognize that a living trust will be helpful in the future so they set up a living trust now to have it in place in the event of an accident or sudden illness.

Charlotte L. Ruse is a Kern County registered and bonded Legal Document Assistant (LDA),

serving Kern County for 12 years by providing affordable self-help legal document preparation and Notary Public services. Kern County LDA #95 EXP. 10-1-17.

Charlotte is not an attorney. She can only provide self-help services at your specific direction.