A trust has several “people” involved. First is the person who creates and funds the trust, the settlor. Second is the person who owns legal title to the goods, the trustee. Third, for tax purposes is the trust itself. Finally, a trust has people who the stuff in trust is to be used for, the beneficiaries.
Now that we have the “actors” defined, we can define a trust.
A trust is when the settlor gives legal title to the trustee to manage the goods for the benefit of the beneficiaries. If those goods happen to consist of investment accounts, then the trust must file a tax return.
Another way is to think of a trust is an agreement between three people. First is the grantor, the person putting stuff into a trust. The second person is the trustee who manages the property in the trust. And finally the beneficiary of the trust, the person who benefits from the goods in the trust (now or in the future). In the case of most revocable living trusts (RLT), the grantor, trustee, and beneficiary are the same physical person, but that person must play each of the roles.
Also, think of a revocable living trust like a corporation that you own. You put stuff into the corporation, you manage the stuff, and you benefit from the stuff, but the corporation actually owns the stuff.
Look at it by the steps:
1. The settlor gives legal title to the trustee. The trustee then legally owns the goods.
2. The trustee then manages the goods for the people named in the trust to get the benefit of the goods.
3. When the settlor is gone, the trustee then follows the instructions in the trust to distribute the goods to the final beneficiaries.
What is the Grantor?
Who is the Settlor?
The settlor or grantor is the person who puts their stuff (assets) into a trust.
Who/What is a Trustee?
The trustee is the person who manages the stuff in the trust for the benefit of another person (the beneficiary).
Who is a beneficiary?
The beneficiary is the person who benefits from the trust. The trustee manages the stuff in the trust for the benefit of the beneficiary.
What is a revocable living trust?
What’s a living trust?
What is a revocable trust?
First of all, it is a trust, with a twist. You may want to look at the previous answer first to get all of the players straight.
You are the settlor.
You are the trustee.
You are the lifetime beneficiary.
Whoever you name is the final beneficiary.
In other words, you put the goods in, then own them as the trustee, for the benefit (usually) for yourself, then name a final beneficiary.
Why go to all of this trouble?
* Avoid probate.
* Keep long term control of assets.
* Leave detailed instructions for the final beneficiaries.
* Create special instructions in case of special needs children or children with drug or alcohol problems.
* Make it a “third party” trust for children with special needs, then after they don’t need public benefits any more, distribute the money as you wish without a Medicaid payback.
The word “revocable” means that you may make changes and even do away with the trust. You reserve those rights as the settlor and trustee during your lifetime. However, once all of the settlors pass, the trust usually becomes irrevocable.
How does a living trust work?
A living trust really goes to work in two instances. Other than that, it is a pretty passive device.
The first is when you are not able to make your own decisions. The trust already has instructions for the successor trustee to follow.
The second is after your passing. The trust already has instructions for the successor trustee to follow.
What is an irrevocable trust?
It is a trust that cannot be changed without court permission. Once things go in, they typically stay in the trust.
What is the use for an irrevocable trust?
The most common purposes of an irrevocable trust is to reduce taxes and protect property, especially against Medicaid…
Who needs a revocable living trust?
Everyone who has assets that they want to keep out of probate, make available immediately, and have control of in case of incapacity.
What is a special needs trust?
A special needs trust is a trust designed for beneficiaries who are disabled, either physically or mentally. It is written so the beneficiary can enjoy the use of property that is held in the trust for his or her benefit, while at the same time allowing the beneficiary to receive essential needs-based government benefits. In addition to the public benefits preservation reasons for such a trust there will be administrative advantages of using a trust to hold and manage property intended for the benefit of the beneficiary if the beneficiary lacks the legal capacity to handle his or her own financial affairs.