A Living Trust is a revocable trust set up during your lifetime. “Revocable” means that you can change your mind and revoke the trust anytime before your death. Just like a will, a revocable living trust is a written document that lets you direct how your property will be distributed or held after your death. Unlike a will, it also directs how you want your property managed during any disability or incapacity during your lifetime. This can save a lot of time and expense by not requiring the legal proceeding necessary to set up a guardianship.
To establish a trust, the person creating it (called the grantor or settlor) has an attorney create a trust document and then transfer property into the trust by deeding or transferring title to property held by the individual setting up the trust. The trust does not take effect until the transfer of ownership of property to the trust. This transfer is known as “funding” the trust. Many people have set up trusts as result of trust marketing programs, but never funded them. If the trust is not funded, it has no effect.
A living trust takes effect during the creator’s lifetime. Grantors usually name themselves as the initial trustee responsible for managing the trust. This allows the grantor to keep control over the trust property during his or her lifetime, then upon death or incapacity, the children or another responsible party is named as the successor trustee.
A properly created living trust can be helpful if you become disabled or incapacitated, you have children or grandchildren with special needs, or if you own real estate in more than one state. It will also eliminate the need to go through probate, the legal process to prove that a will is valid — if the trust has been properly set up and funded.
Living trusts are not the right estate planning tool for everyone, but can be very helpful if you have property in more than one state. Although probate is not very difficult or expensive in Texas, in can be very difficult and expensive in other states, and a properly funded trust can save a lot of time and expense for those who have property in other states or who just want to avoid probate and the listing of assets in the public record.