A trust is a type of legal device which allows the owner of property to make transfers of that property. It also allows them to have the property, referred to as trust assets, managed on behalf of someone else, referred to as the trustee.
While trust laws may vary from state to state, trusts are generally an efficient way for people to transfer their assets in a way that they can control and manage. An example of this would be how they may place specific conditions on the trust property that must be fulfilled before the property is transferred.
An express trust is an intentionally, deliberately created trust. This specific trust allows the trust creator to distribute property or funds to a trustee, who then holds the property “in trust.” “In trust” means that they hold legal title to the trust. The trustee holds this property in trust subject to the rights of specific individuals, known as beneficiaries, who are the people who are entitled to the trust property.
The law recognizes two types of express trusts: a lifetime or inter vivos trust and a testamentary trust. A lifetime trust is set up during the lifetime of the person who created the trust, also known as the settlor.
Generally speaking, the requirements that must be satisfied for a trust to be considered valid are:
- There must be a settlor (creator);
- The settlor must deliver legal title to property;
- The property, which is also referred to as res, corpus, or trust principal, must be delivered to a trustee;
- The trustee must hold legal title to the property;
- The legal title must be held for the benefit of one or more trust beneficiaries;
- There must be intent to create a trust;
- The intent to create a trust must be for a lawful purpose; and
- The document embodying the trust must be validly executed.
What Is A Living Trust?
A living trust is a specific type of trust that is created while the creator is still alive. A living trust allows the grantor and the beneficiary to avoid the probate process. To reiterate, the person who is appointed to manage the funds of the trust is known as the trustee. There are some instances in which you may be the trustee of your own living trust, meaning that you are controlling all property in the trust.
The main advantages of living trusts or inter vivos trusts include, but may not be limited to:
- Avoiding probate of specific property included in the will;
- Reducing estate taxes and other such costs; and
- Setting up long-term property management.
Once again, the laws which govern living trusts will vary from state to state. Whether you decide to set up a living trust will largely depend on your goals and needs in terms of your estate and assets.
You could avoid the probate process by transferring property into the living trust before your death. When doing so, all that you transfer into the living trust will pass to the recipients outside of probate. The person that you appoint to handle the trust after your death is referred to as the “successor trustee,” and they are responsible for transferring ownership to the beneficiaries that you named in the trust.
This is a considerably speedy process, and there are generally no fees involved. Once the property has been transferred to the named beneficiaries, the living trust ceases to exist, as its purpose has been fulfilled.
Is It Easier To Create A Living Trust, Or To Write A Will?
Living trusts are not considered to be any more complicated than will documents. As such, you should determine whether a living trust is right for you, as opposed to considering which method would be the easiest to complete.
The living trust can often be considerably flexible, as there are many different types of property that can be included in a living trust. However, living trusts can sometimes be unnecessary. As such, there are some differences between a will and a living trust that should be taken into consideration.
Some examples of such considerations include, but may not be limited to:
- Drafting and maintaining a living trust can take more time than compared to writing a will;
- The lawyer’s fees for living trusts may be higher than those associated with creating a will;
- People with large estates can sometimes save a considerable amount of money by using living trusts, as these trusts can help avoid certain types of taxes;
- Older people who are more likely to die within 10 years may find that a living trust allows them to control the distribution of their property in a more direct way;
- A will is generally more appropriate for younger people who are not at the end of their life expectancy;
- Wills are an efficient way to distribute your property if you do not have a large estate or many valuable assets, while a living trust is better suited for managing a larger estate that has more assets; and
- If you are married, you can leave the bulk of your estate to your spouse by owning your home in joint tenancy. Bank accounts may also be held or possessed in joint tenancy. Additionally, if you live in a community property state, probate is generally faster, cheaper, and less necessary to avoid.
What Are Some Of The Disadvantages Associated With A Living Trust?
Some specific disadvantages of living trusts include:
- Limitations: There are some circumstances in which living trusts may not cover the entire estate. As such, living trust documents must generally be considerably specific when naming the property that is included;
- Power of Attorney: It may still be necessary to create a durable power of attorney, even with a valid living trust in place. This is because a successor trustee may not always have the full authority to manage property outside of the trust; and/or
- Confusing Terms: Having a living trust can create confusion, especially if some of the terms in the trust conflict with other documents, such as other trusts or will documents.
As was previously mentioned, the features of a living trust may work to your advantage, which largely depends on your specific needs. An example of this would be how you might not actually want to cover your entire estate, especially if your estate is considerably small and you only want to transfer a specific item of property to a person. This would be when the limitations that are associated with a living trust could actually work to your advantage.
What Are Some Examples Of Common Legal Disputes Involving Living Trusts?
It is important to note that living trusts may be associated with various legal disputes. Examples include:
- Conflicts over the beneficiaries that have been named;
- Conflicts regarding the selection of the trustee;
- Issues in which the trustee has violated their fiduciary duties; and
- Disputes regarding the way in which the property is to be distributed.
Conflicts associated with a living trust can be complex, and may require the guidance of an estate attorney in order to reach resolution. Additionally, some conflicts may arise when the living trust is created; an attorney can help provide insight regarding the best way to create a living trust.
Do I Need An Attorney To Establish A Living Trust?
If you wish to create a living trust, or are experiencing issues associated with a living trust, you should consult with an experienced and local living trust lawyer. An area attorney will be best suited to help you understand your legal rights and options according to your state’s specific laws regarding the matter. Additionally, an attorney will also be able to represent you in court as needed.