How does a Living Trust work?
I’m interested in creating a Living Trust, what are the steps?
The first step in creating a Living Trust is to decide who you want to get your assets when you are gone. Once you have decided who you wish to receive your assets, that information gets written into a document that is signed and notarized along with a list of provisions. These provisions may or may not be needed but they should be in the trust just in case. The living trust is created once the document has been signed and notarized. To fund the living trust you will need to title all assets such as real property in the name of the trust.
If you have a house that is part of the trust then what we would do is do a grant deed from you as an individual or husband and wife to you as the trustee or Trustees of your revocable trust. This will clearly show the name of the trust and not the individuals as the owner of the property. It’s also important to note that the trust is revocable so it’s not like an irreversible kind of situation. In this example, you just granted yourself back as individuals and so all of the assets need to be titled in the name of the Trust in order to be managed by the successor trustee.
It’s kind of similar to a corporation in the fact that the President of the corporation can manage all the assets that are titled in the name of the corporation. If an asset is inadvertently not titled in the name of the corporation then a corporation president has no right to manage that asset. Keep in mind the term living is not like a plant in your garden that you have to water every week, the term living just says that the trust was created while a person was living.
A trust can also be created after death but that’s called a testamentary trust. This is not what people are normally thinking about when they hear the term “living trust”. The entire Trust is usually completely revocable or changeable/amendable without limitation. In a husband-and-wife situation frequently half of the trust after the first spouse dies becomes irrevocable or non changeable. The reason for this is so that if, for example, the surviving spouse gets remarried they don’t move assets around so the deceased spouse’s children don’t get their intended inheritance.
The living trust is basically a nonentity as just title holding only that’s transparent with the owner. There’s no asset protection, not that that’s necessary, but it’s just a matter of creating a document giving the trust a name and then moving the title of the asset into the name of the trust. Once this is done then it just sits that way until one of the spouses passes away then the terms of the trust become activated.
Want more information about how a Living Trust works?
Rex Crandell Firm in Walnut Creek, CA is ready to answer your questions!
Call us today at 925-934-6320 to learn more about how a Living Trust works.
