The Basic Use of a Living Trust

Estate planning is a tricky concept, but one you have to tackle. The living trust is a key component of most estate planning efforts.

The idea of a Trust began back in the 16th century in England as a way to circumvent the control of the King over property after death. The King had the right to distribute a person’s property after his death and people worried that their estates would not be distributed to their heirs by the King. They would deed their property to another entity, usually the Church, in return for the promise that the Church would distribute it to their heirs according to their wishes. In other words, they were trusting the Church to look out after their interests after their death.

In the past in the United States, a trust was thought of as being something of use only to the very rich. This perception has changed in the past years and today an instrument known as the Living Trust has become popular. The Living Trust is simply a name given to a trust that is established while you are still living. It is a legal instrument that names three different parties. The person who establishes and funds the trust is called the Grantor, or sometimes the Trustor. The person who controls the assets of the trust is called the Trustee. The third party is the beneficiary, or beneficiaries. They are the people designated to receive the benefits of the trust according to the specific wishes of the Grantor.

To understand the value of a trust in estate planning, you must understand that the title and ownership of the assets is legally passed to the Living Trust. The Trustee has an obligation to administer the Trust according to the instructions of the Grantor, but from a legal point of view, it is the Trust that is the owner. The Grantor will eventually die, but the Trust does not die. This is the purpose of the Trust. The legal issues such as estate taxes and probate courts that can hinder and delay the transfer of an inheritance do not come into play.

Privacy is also insured. The affairs of the Trust do not come under public scrutiny as do the affairs of a probate court. The Trust can also make sure that things are done exactly as the Grantor wanted them done. The family disputes and contested wills are avoided because the Trust is the owner of the assets and is bound to distribute them according to the terms of the trust. It is not a matter for argument in a court.

Most financial experts suggest that anyone with an Estate of at least $100,000 should be giving some serious consideration to the establishment of a Living Trust. It remains one of the most effective tools in the Estate planning arsenal for giving a person the peace of mind that comes from knowing that their estate will be handling as they wanted it to be handled after their death.

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