3 Main Parties of a Revocable Living Trust
A revocable living trust is an agreement that you write with yourself about how your property will be managed during your lifetime and after you die. A revocable living trust has three main parties: (1) the Grantor; (2) the Trustee; and (3) the Beneficiary.
Trust Maker or Grantor
When you create a revocable living trust, you the grantor or the trust maker. This simply means that you are the person who created the trust.
The Trustee is the person or people, or the institution or business, that manages the trust assets or property for the beneficiaries of the trust. Most people name themselves as the trustee in charge of managing their trust’s assets during their lifetime. This way, even though your assets have been put into the trust, you can remain in control of your assets during your lifetime.
You can also name a successor trustee (a person or a business or institution) who will manage the trust’s assets if you ever become unable or unwilling to manage your property, or when you die.
The trust beneficiary is the person or people who receive the benefit of the revocable living trust’s assets or property. This means that the trust’s property will either be distributed to them outright, or held in trust for their benefit. During your lifetime, you will likely be the main trust beneficiary.
If you become unable to manage your day-to-day affairs, you likely will continue to be the trust’s beneficiary. Once you die, other people, institutions, or charities may be the trust’s beneficiaries.
People often name their children or other family members or loved ones as trust beneficiaries. These beneficiaries ultimately will inherit the trust’s property when the trust maker dies. People also may name one or more charities to receive a portion of the trust’s property, if the trust maker is charitably inclined.
What’s In a Name?
A revocable living trust is sometimes called a revocable inter vivos trust, revocable trust or a grantor trust. This simply means that you can amend or revoke your trust at any time, as long as you are still competent.
An irrevocable trust is another type of trust. Irrevocable trusts are not revocable living trusts. An irrevocable trust cannot be changed once you establish it, except in certain limited circumstances. Irrevocable trusts are an advanced estate planning tool. They usually are used to achieve a specific estate planning goal.
Benefits of a Revocable Living Trust
Your revocable living trust has many benefits. Your revocable living trust agreement will likely:
- Give the trustee the legal right to manage and control the assets held in your trust.
- Instruct the trustee to manage the trust’s assets for your benefit during your lifetime.
- Name the beneficiaries (persons or charitable organizations) who will receive your trust’s assets when you die.
- Give guidance, power and authority to the trustee to manage and distribute your trust’s assets.
- Your Trustee
Your trustee stands in a special relationship to the trust beneficiaries. You trustee is a fiduciary. This means that he or she holds a position of trust and confidence. Your trustee is subject to strict responsibilities and very high standards. For example, the trustee cannot use your trust’s assets for his or her own personal use or benefit without your explicit permission. Instead, the trustee must hold and use trust assets solely for the benefit of the trust’s beneficiaries.
A living trust can be an important part — and in many cases, the most important part — of your estate plan. Please contact us if you would like to discuss whether a living trust is right for you.