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Living Trusts

By Sharon Frankenberg,
Attorney at Law

A trust is a right of property held by one party for the benefit of another. This can include real property as well as personal property. The trustee holds the title to the property for the benefit of another person, the designated beneficiary. The trustee has financial duties and obligations owed to the beneficiary. Trusts are typically in writing but a trust may arise by operation of law where the court imposes a trust based upon the facts and equities of the situation. 

A living trust is an inter vivos trust meaning that it is a transfer of property during the lifetime of the settlor (creator) of the trust rather than upon his or her death. Often, a living trust is revocable meaning that the assets placed in the trust could be transferred back into the settlor’s under certain circumstances. The settlor decides which assets are to be included in the living trust. It is also very common for the settlor to name himself or herself as trustee such that control over the assets of the trust is retained. A successor trustee may also be named to take over in the event of the original trustee’s death or incapacity. The settlor may also name him or herself as beneficiary of the trust. A properly drafted living trust can allow someone to manage their property and get the benefit from it during their entire lifetime. It provides a means to help a disabled person to manage his or her affairs in the future while maintaining control as long as he or she is able.
After the living trust document is created and executed, any designated assets need to be transferred out of the settlor’s name and into the name of the trust. This means that real property deeds should be signed and recorded, vehicle titles reissued in the name of the trust, and funds placed into accounts owned by the trust. It is also recommended that the trust obtain an employer’s identification number for the trust from the Internal Revenue Service.
There are several benefits of holding assets in a living trust rather than just maintain ownership in an individual’s name. The complete details of the trust are rarely required to be disclosed except under extraordinary circumstances providing more privacy to both the settlor and the beneficiaries. Also the assets owned by the trust are not required to go through probate. This is particularly beneficial if the trust assets are located in more than one state. Going through probate court in more than one state can be very expensive and time consuming. Also selling or transferring stocks which are held in a living trust is much easier than those which are included in a probate estate.
Because a living trust is typically revocable, it provides little protection from creditors. It does not help the settlor cut his or her income tax or estate tax bill. It does not help qualify you nursing home care paid for by Medicaid. It does not protect you from disgruntled heirs. A living trust does not make a will unnecessary. You should consult an attorney for assistance and advice with your individual situation.

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