Revocable Living Trust-An Overview

The use of a revocable trust in estate planning has two major advantages:  1) it is by far the most effective tool to assist an individual during the latter stages of his or her lifetime with the management of his or her property, especially when the individual is incapacitated; 2) it is a very effective tool, if properly funded, to avoid many of the unpleasant consequences of probate, namely, excessive probate fees and delays in accessing the individual’s assets after his or her death.

There are several other advantages of a revocable living trust of which a qualified Kansas City estate planning attorney is well aware.  Before exploring these advantages it is necessary to provide some basic information for the uninformed.

Revocable (Living) Trust Defined

A revocable (living) trust is created by a written agreement whereby an individual (referred to as the “Grantor” or “Settlor”) transfers property to a Trustee, either to another individual or a corporate Trustee, who holds and manages such property for the benefit of other persons who are referred to as the beneficiaries of the trust. The second type of revocable living trust is a self-declaration of trust whereby the settlor declares himself or herself trustee of property owned by the settlor for the benefit of the settler and others.

(a)  Grantor (Settlor) —The grantor (also known as the “Settlor”) of the living trust is the person that establishes the terms of the trust agreement and who transfers property to the trust.  Clients are well aware that a will can be changed but often are worried that a trust can not be changed once established.  With a revocable living trust, however, the Grantor retains the power to alter or amend or revoke the trust.  Kansas City estate planning lawyers know that the ability to change or get rid of the document is why many clients view the living trust as an effective estate planning tool especially since it offers, as explained below, many features that a will does not.

(b)  The Trustee —When property is transferred to a trust, the person(s) or entity (e.g., a corporate trustee) becomes the legal title holder of the property.  Depending on the terms of the trust document, the Trustee may or may not have any beneficial interest in the property.  Key to the living trust, however, is the duties of the Trustee(s) who is under a fiduciary duty to manage the trust assets in accordance with the terms of the trust agreement and in the best interests of the beneficiaries.

(c) The Beneficiaries —The beneficiaries of the Trust are those person(s) or entities (usually a charity) that are entitled to receive the benefits of the Trust in the form of income and/or principal distributions.

If you’d like to learn how a revocable living trust could be of benefit to you and your family, send us an email through the form below. We look forward to the conversation.

*This post was originally published September 4, 2011