The Law Office of Richard Biel, P.C.

Revocable living trusts, sometimes also called “intervivos trusts,” can be an effective estate planning tool. 

Who is involved in a living trust?

Settlor(s): the person or persons who create the trust agreement while living

Trustee(s): the person or persons who are responsible for carrying out the instructions set out in the trust agreement
Successor Trustee: the person or persons named to step in when the original trustee(s) are unable or unwilling to serve
Beneficiary: the person or persons who are to benefit under the terms of the trust agreement

What is a trust?

A trust is a written agreement (or contract) between the settlor and the trustee under which the trustee holds and manages property for the benefit of the beneficiaries chosen by the settlor.  In a living trust, the settlor is often also the trustee and the beneficiary during their life. 

Like a Will, a living trust is a set of directions. Unlike a Will, it provides direction to the trustee about how the assets are to be distributed and managed during the settlor's life and upon the settlor's mental incapacity. Like Wills, living trusts include directions for how the remaining assets are to be distributed upon the settlor's death. The living trust acts as a Will substitute.

Can a living trust be changed?

A living trust may be revoked or amended at any time while the settlor is alive and able.  After a settlor dies, however, his or her trust becomes irrevocable, which means it cannot be changed.

What is trust funding?

Trust funding refers to the retitling or acquiring of assets in the name of the trust.  The settlor conveys all or some of his property to the trustee so that the trustee becomes the owner of the property subject to the terms of the trust agreement.  Once property is properly titled, the trustee may manage and distribute the property as instructed in the trust agreement. 

A trust may be created, but may never be funded or not funded completely.  A settlor will also execute a “pour-over Will” in conjunction with their living trust.  This Will directs all of the settlor's property that is not properly titled in the name of the trustee to be distributed to the trust.

When is a trust appropriate?

Living trusts are not just for wealthy people.  A living trust is an effective estate management tool before and after a settlor's death, and allows for a safe way to manage and use trust property for the benefit of the settlor and his chosen beneficiaries. 

Living trusts provide additional benefits, particularly when the settlor owns real estate in different states or becomes incapacitated. 

How can a living trust provide protections for mental incapacity?

A properly drafted living trust often includes terms that protect the settlor and their property if the settlor becomes mentally incapacitated.  The settlor can name a successor trustee to manage the trust property upon their incapacity.  The living trust instructions can provide the successor trustee with guidance on how property is to be managed, bills are to be paid, and the how the settlor's support and maintenance needs are to be met.  This can prevent the settlor's loved ones from having to go to court and be appointed as a guardian and/or conservator for the settlor.

How is a living trust administered upon death?

A living trust includes instructions on how to administer the trust property upon the settlor's death.  Instructions can include terms that allow for beneficiaries to receive the benefit of trust property in a manner that protects them from their creditors and maximizes the benefit of the trust property for the beneficiary. 

Like a living trust, a Will includes instructions for the distribution of a decedent’s estate.  However, a Will must be probated.  Probate is the legal process during which a judge validates the Will, gives the personal representative the authority to act on behalf of the decedent’s estate, and supervises (either informally or formally) the process of distributing the decedent’s property and paying their valid debts.  Probate cases are generally included in the public record.  Unlike Wills, a trust administration does not require court involvement and allows for a private distribution of the settlor's property. 

Having a living trust in place at the settlor'ss death does not mean that the settlor's survivors will be able to avoid a probate action.  If the living trust is not properly funded, the property outside of the trust will need to be transferred into the trust through the use of the pour-over Will and a probate action.  After the pour-over Will is probated and the property is transferred into the trust, the trustee will then distribute the property per the instructions provided in the trust agreement.

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