What is a Revocable Living Trust? Click play on the video above to learn more about revocable living trusts and how they can assist you with your estate planning needs. A living trust can be an incredibly valuable and powerful tool when it comes to estate planning. A revocable living trust is a legal arrangement, used by estate planners that allows assets to be held and managed by a third party. This third party in a trust is known as a Trustee. The Trustee is the person or group of people responsible for ensuring that an estate is handled in the manner specified in the trust documents.
A revocable living trust lets you decide how your assets are managed and distributed. A living trust holds (owns) the property you put into the trust. Unless specifically stated in the language of the living trust, you are permitted to control the trust assets as the trustee while you are living. Upon your death, the living trust becomes irrevocable and the assets in your trust will be distributed to the beneficiaries that you have designated.
The person who creates the living trust, is usually referred to as a settlor or grantor. The successor trustee is the person or institution who takes over the management of a living trust when the original trustee (typically you) has passed or become incapacitated. The beneficiaries of the trust are the people named in the living trust who will receive the assets held by the trust once you have passed.
Language defining the rules of the trust, such as the name of a successor trustee and information on how the assets of the trust are to be distributed upon your passing are all recorded in the trust documents. The living trust is funded by transferring your personal assets to it. Once the assets are transferred, the trust owns the assets. While the trust is revocable and you are designated as the trustee, you may place assets into the trust or remove assets from it. Most types of assets can be placed into a living trust. Common examples of irrevocable trust assets include real estate, land, automobiles, business interests, stocks, bonds and bank accounts.
What is trust administration? Trust administration is the process of managing and distributing the assets of a trust. When a person creates a revocable living trust and passes, that trust typically becomes irrevocable and enters a phase requiring trust administration so that the assets held in the trust can be distributed to the beneficiaries of the trust. The creator of the living trust, usually referred to as a trustor, settlor or grantor; transfers ownership of their assets to the trust. Typically while the trustor is alive, they also act as the the trustee (the person managing the trust) but designate a successor trustee (the person or people who will administer the trust when they pass or if they become incapacitated) in the trust documents. The successor trustee is responsible for carrying out the terms of the trust and managing the trust assets according to the instructions set forth in the trust document by the trustor. In the process of trust administration, the trustee has a number of duties. Common trust administration duties include:
Paying the expenses and debts of the trust
Managing the trust assets in a way that is consistent with the terms of the trust
Managing any investments held by the trust
Maintaining accurate records of all trust transactions
Filing any necessary tax returns on behalf of the trust
Distributing the trust assets to the beneficiaries according to the terms of the trust
Providing accountings to the beneficiaries as required by law or as specified in the language of the trust document
In some cases the administration of a trust can be complicated as well as time-consuming and a professional such as an attorney or trust administration company may be hired to handle or assist with the trust administration. Factors such as the number of beneficiaries, types of assets held in the trust, quantity of assets or the complexity of the trust accounting and taxes may all be considered when deciding if a professional trust administrator should be utilized.