A living trust, also known as a revocable trust, carries advantages that are not available in a traditional will. This type of estate plan is often considered because of its potential for avoiding probate and reducing tax implications with an estate upon one’s death. However, it is important to understand this method of estate planning to ensure that it is the appropriate option based on personal needs and interests.
The revocable trust allows an individual to continue to manage assets during life while establishing a plan for their distribution after death. The grantor is the person who establishes the trust, and an individual selected for trust administration is called a trustee. The grantor may also be the trustee although a different individual or entity may be appointed to this role. Because this method is revocable, it may be changed or terminated while the grantor is alive unless that individual has become incapacitated.
In a revocable trust, a trustee may take over management of assets at the point of a grantor becoming unable to handle these issues. This provides the grantor with the benefit of being able to choose the individual to manage the estate rather than relying on a court appointment. At the time of the grantor’s death, the trustee takes responsibility for paying claims and obligations. If the grantor was the original trustee, a designated successor takes this responsibility. Assets must be transferred into a trust prior to death for the trustee to be able to administer them.
An individual who is unsure of how to establish and fund a trust may want to work with an estate planning lawyer to be sure that tax implications and other issues are carefully considered. While trusts are widely promoted for their benefits, an experienced lawyer may also be able to provide information about any problems associated with such a vehicle.
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