Revocable living trusts provide multiple benefits for those who utilize them properly – this begins with an understanding of how these trusts work and what they are designed to do.
Revocable living trusts, also known as inter-vivos trusts, provide multiple benefits for those who utilize them properly. This includes avoidance of probate and guardianship proceedings, ability to stipulate how assets will be managed and distributed during incapacity and following death, and privacy.
In this blog post, the first of three on revocable living trusts, we explain the main contents of this important estate planning document.
Declaration of Trust
All revocable living trusts contain a provision in which the person who creates and signs the document (known as the “trustor, “settlor”, or “grantor”) gives a person or institution (the “trustee”) the power to manage some or all of his or her property for the benefit of others (the “beneficiaries”).
In California and other community property states, spouses typically create one trust together; in other states, each creates his or her own trust.
Appointment of Successor Trustee
The first trustee of a revocable living trust is almost always the same person as the trustor. For married couples who create a joint trust, there are usually two trustors and two trustees. When they can no longer manage their own assets due to incapacity or death, the management of the trust will shift to a successor trustee named in the trust document.
Responsibilities of a Trustee of a Living Trust
Revocable living trusts list the responsibilities of the trustee(s) to the trustor(s) and the beneficiaries, such as:
- Following all instructions as specified in the trust
- No comingling (mixing) the trustee’s personal assets with trust assets
- Prudent investment of trust assets to minimize risk of loss
- Diligent recordkeeping and reporting to trust beneficiaries
Beneficiary Designation
A revocable living trust provides first and foremost for the trustor during their lifetime. After the trustor’s death, the trustee must provide for the beneficiaries in the manner specified in the trust instrument. If a beneficiary is a minor, the trust should have provisions regarding the management of the minor’s assets until the beneficiary reaches a certain designated age. This generally includes payments for the minor’s education, health, and general support, and percentage distributions at (for example) ages 21, 25, and 30, so that their inheritance cannot be spent all at once.
Trust beneficiaries may receive a fixed amount of money, a designated asset, or a percentage of the estate. Estate planning attorneys discuss the advantages and disadvantages of each of these options with their clients before drafting the trust.
Experienced California Estate Planning Attorneys
The drafting of a revocable living trust is often complex and requires the expertise of a knowledgeable estate planning attorney. Ensure that your trust is properly drafted by contacting the San Francisco Estate Planning Group at Moskowitz, LLP today.
Our next posts in this series will cover the advantages of California revocable living trusts and transferring property to your trust.