There are three primary parties involved in any living trust: the trustor, the trustee, and the beneficiaries. Each of these parties plays a very specific role in the creation and administration of the trust.
Living trusts are a valuable tool in the estate planning process. Unfortunately, many Floridians do not make use of them. The American Association of Retired Persons (AARP) notes that only around 40 percent of Americans have a will or living trust. Understanding the parties in a living trust could help you prepare for developing an estate plan that works for you.
The trustor is the creator of the trust and the original owner of the assets to be placed in the trust. This role is commonly referred to as the grantor or the settlor. The trustor is solely responsible for setting up the parameters of the trust. This should come as no surprise, given that it will ultimately hold their assets and distribute them according to their preferences in the future.
The trustor makes all of the decisions regarding the other parties to the living trust. This begins with naming the trustee that will oversee the living trust, as well as any successor trustees that might follow. Additionally, the trustor must select the beneficiaries that will ultimately benefit from the trust after the trustor passes away. It is also the role of the trustor to determine what assets will be held in the living trust.
The process of transferring those assets is known as funding the trust. A trust could be funded with anything of value, including cash, antiques, or even virtual assets like mining rights. In some cases, the trustor will have little to no involvement with the trust after it is created. In others, the trustor might retain the right to make changes to the trust during the course of their lifetime.
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The trustee is the individual that is in charge of managing the trust after it is created and funded by the trustor. While there is often one individual that serves as a trustee, it is also possible to have multiple trustees. In these cases, the trust document must determine if decisions can be made with a majority vote of trustees or if it requires a unanimous decision.
Sometimes, the trustor will make a series of appointments should the original trustee pass away, step down from the position, or become incapacitated. Additional trustees are known as successor trustees. They are required to do more than simply monitor the status of the trust’s assets. They are expected to put the value of those assets to work in an effort to make a return while the funds are held in the trust.
Ideally, the trust will continue to earn insurance until the assets are ultimately distributed. The trustee has a duty to both the trustor and any beneficiaries. This means they have a duty to act in each of their best interests. The failure of the trustee to meet their fiduciary duty could result in significant litigation against the estate.
The beneficiary is the individual that receives the assets held by the trust upon the death of the trustor. There is no limit to the number of beneficiaries a trust can have. Many living trusts might have a single beneficiary, while others could have far more.
The language of the trust document itself will not only identify each beneficiary but also set out what the beneficiary is set to inherit from the trust. Whether or not the trustor can alter the terms of the trust or change beneficiaries during the course of their life will depend on if the living trust is revocable or not.
The beneficiaries of a living trust can inherit property from the trust without needing to go through probate court. This is due to the transfer of ownership in the property from the trustor to the trust itself.
Discuss a Living Trust with an Estate Planning Attorney
If you are considering an estate plan, understanding the parties involved in a living trust is only the first step in the process. You must also consider what assets you intend to place in the trust as well as who you intend them to go to upon your passing.
One mistake during the drafting of a trust plan could put the entire process in jeopardy. For that reason, it is crucial that you work with legal counsel that understands the trust process from beginning to end. For guidance on the estate planning process, call (407) 578-1334 for a consultation with a team representative at Bogin, Munns & Munns today.