If you want your loved ones to avoid the pain of going through probate and probate court, you may know that one great way is to have a living trust. What do you look for in a trust, specifically a living trust or a revocable living trust? For a living trust to work properly, you have to transfer your assets into it. Title for your real estate and assets must be changed from your name to the name of the trustees of your trust, so that they will be held within the trust. Because your name is no longer on the title as an individual, there is no reason for the court to get involved if you become incapacitated or if you pass away. This makes it very easy for your successor trustee to step in and manage your financial affairs and avoid dealing with probate court.
Let’s define the parties involved in a trust:
First, there is the grantor. Also called settler, trustor, creator or trust maker, the grantor is the person who sets up the trust. If you are the one passing on the real estate or other property, you are the grantor. If you and your spouse set up a single trust together you are co-grantors of the trust. Typically, only the grantor or grantors can make changes to the trust.
Then there is the trustee. The trustee manages the assets in the trust. With real estate, the trustees names are actually on title to the property (for example: John Doe as trustee of the John Doe family living trust). Many people choose to be their own trustee and continue to manage their affairs for as long as they can.
A successor trustee is the person chosen to manage the living trust when the trustee is no longer able to handle the responsibilities. This usually happens when the grantor (who can also be the trustee) passes away or becomes incapacitated. Most living trusts will name multiple successor trustees in case one or more of the original choices die or becomes incapacitated before the grantor does. Sometimes two or more children are named to act together and other times a corporate trustee, like a bank or trust company is chosen. It can also be a combination of the two.
The beneficiaries are the people or organizations who will receive the real estate and/or trust assets after the grantor dies. Whether it’s your children, grandchildren, a favorite charity or anyone else, the beneficiaries are the receivers of the assets.
These four parties make up the living trust system. It’s important that you pick people or entities that are best suited to handle their particular role in the living trust. To make sure that your beneficiaries can avoid probate you also need to know who the trustees are, who other successor trustees are, the order they are in and if you will be acting alone or with someone else.
With real estate transactions, knowing the parties involved is the most important part of dealing with a trust. Your escrow company and/or title company will need to know up front who the parties are that will be involved in the transaction. Often the first questions escrow/title companies ask are:
· Who are the trustees/trustors?
· Who are the successor trustees?
· Who are the beneficiaries?
· What is supposed to happen upon the death of the trustees/trustors?
The answers to these questions guide us through the transaction. These answers can only be found in the trust. Upon the death of the trustors/trustees, the title/escrow companies will need to see a copy of the trust and all amendments to the trust (if any).