When creating an estate plan, the first thing many people hear about is putting their assets into a trust, but what does this mean?  A trust is an agreement that determines how a person’s property is managed and distributed during their lifetime and upon their death.  Keep in mind that every state has different rules and regulations, what might work in New York, might not work in California.

What’s Involved In A Revocable Living Trust?

The revocable living trust usually contains 3 different parties.  The Settlor, The Trustee, and The Benficiary.  The Settlor is the person who creates the trust (the one who has the assets).  Many times a trust has joint-settlors when there is a husband and wife putting their assets into a trust.  The Trustee is the person who the settler “trusts” to manage the property according to the terms of the trust.  The Trustee is usually the Settlor (while the Settlor is alive) and then another person or corporation will take over as trustee.  The Settlor gets to select who the Trustee is and can specifically exclude people from serving as trustee. Finally, perhaps the best job, the Beneficiary.   The Beneficiary is the person who receives the income and/or principal from the trust.  During the Settlor’s lifetime, this is usually the Settlor, but can be anyone.  However, there may be limitations on what the Trust can distribute (how much money, for what purpose, can assets be sold, etc.)

What’s The Benefit Of A Revocable Living Trust?

There are a few reasons to create a revocable living trust.  First, and most importantly, by creating a trust, you are saving your estate from potentially high estate taxes, you also avoid probate expenses, avoiding probate administration and almost all details about your estate will be kept private (a probate is open to the public). Additionally, your trust assets can be transferred more quickly than going through probate.  Finally, if you run any type of business, by setting up a revocable living trust, you can set up a successor to continue to manage the business (pay bills, distribute products, etc)