The Revocable Trust (also known as a "Living" trust) is a basic tool for current estate planning. By using a revocable trust, a person can manage his assets during his lifetime and, upon his death, pass his asset on without the need of a lengthy and expensive court supervised probate proceeding.

An individual should consider having such a trust if he owns real property or if his estate has a value totaling more than $100,000.

How a revocable trust works

As the word implies, a trust involves assigning things with a person under conditions where you trust that person to act in your best interests. The three participants in a trust consist of:

(1) The trustor (also known as a settlor). This individual is the person creating the trust and transferring the property to it,

(2) The trustee. The trustee is the person who receives the things and acting on behalf of the settlor/trustor,

(3) The beneficiary. The beneficiary is the person benefitting from the terms of the trust.

State law imposes a number of terms and conditions under which the trustee must act with regard to the trust property. Others are provided by the document creating the trust. The trustee is obligated to follow both the conditions imposed by law and those in the trust document.

First among the terms provided by law is that a trustee is a fiduciary, or a person who has a high standard of conduct and should act only for the benefit of the intentions of the settlor/trustor.

The title "living trust" is used to refer to a trust set up to circumvent inherent problems in probate proceedings as well as allowing for estate planning and tax saving.

Living trusts usually contain instructions for managing the property placed in the trust during trustees’ lifetime and also providing for what will happen when he dies. In this sense, it replaces most of the function of a Will. However, it is still strongly suggested that you have a Will in addition to a living trust.

The settlor/trustor, or person creating the trust, places some or all of his property into the trust. That means that you transfer title to those items to a trustee who will manage the property in accordance with the instructions in the trust document.

In the case of a living trust, the settlor/trustor is nearly always the trustee and the primary lifetime beneficiary. The law will allow you to split yourself up in this way, which means you can be a settlor/trustor, trustee and beneficiary all at the same time.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.