Estate Planning 103: What Is a Trust?

This is part 3 of a 5-part Q & A addressing commonly asked questions regarding estate planning. 

These blogs are intended to educate you about the differences between Trusts, Wills, & Living Wills, and help you determine which is right for you.

What is a Trust?

There are many different types of Trusts, but their common feature is that they all indicate how you want the property in the Trust managed and distributed to the beneficiaries.  The most popular type of trust is called a Revocable Living Trust.  As indicated in the name, a Revocable Living Trust can be changed or revoked entirely.  It is called a “Living” Trust because it is created while you are alive. 

Definitions

The person who puts the assets into the Trust is called the “Grantor”, “Settlor”, or the “Trustor”.  The person in charge of managing the Trust assets is called the “Trustee”.  When the Trust is created you are both the “Grantor” and the “Trustee”.  You’re the one who transferred the assets into the Trust and you’re in control of your property.  You will also designate “Successor Trustees” to be in charge of your assets when you are incapacitated and after you pass away.These duties are similar to those of the "Personal Representative" (aka, "Executor") under a Will.

Will versus Trust

One of the benefits of having a Trust versus a Will is that assets in a Trust DO NOT go through Probate.  This is because ownership of your property is transferred into the Trust and you tell the Successor Trustee how to manage and distribute the assets.  Property that is not transferred into the Trust may be subject to Probate.

Another benefit to a Trust is that it provides privacy.  When a Probate is opened the Will becomes public record.  However, a court does not supervise the administration of the Trust.  The only time your Successor Trustee should need to go to court is if there is ambiguity in the Trust document or if your beneficiaries contest the terms of the Trust.  This is why it's important to have a well drafted Trust document.

Disclaimer: This information is provided by estate planning attorney Stephanie D. Winstead, with offices in Laguna Niguel, California and Carlsbad, California.  Mrs. Winstead practices exclusively in the areas of tax, asset protection, and estate planning.  She is licensed to practice law in the State of California ONLY.  This information does not create an attorney-client relationship, and is only intended to provide general advice.  If you wish to create an attorney-client relationship for specific legal advice, it will be necessary to enter into an engagement for legal services.