Revocable Living Trusts
A revocable living trust is a legal arrangement created during a person's lifetime to manage their assets and property. Here's an explanation of the key roles involved:
Revocable Living Trust Overview
A revocable living trust is a formal relationship in which the trust maker (grantor) names a trusted individual (trustee) to manage accounts and property for the grantor's benefit and the benefit of others (beneficiaries). The trust document is effective during the grantor's lifetime, during incapacity, and after death. As the name suggests, this type of trust can be changed or terminated by the grantor at any time.
The Grantor
The grantor, also known as the trustor or settlor, is the person who creates the trust and transfers assets into it. The grantor's primary role is to:
1. Establish the terms of the trust.
2. Define its purpose.
3. Designate the beneficiaries.
4. Specify how the trustee will manage, invest, and distribute the assets.
In a revocable living trust, the grantor often retains significant control over the trust during their lifetime.
The Initial Trustee
In most cases of revocable living trusts, the grantor serves as the initial trustee[3]. This arrangement allows the grantor to:
1. Maintain control over the trust's accounts and property.
2. Manage the trust as before it was created, but in a different role.
3. Make changes to the trust as needed.
By acting as both the grantor and initial trustee, the person creating the trust retains full control over their assets while still establishing a framework for future management and distribution.
Successor Trustees
A successor trustee is an individual or entity designated to take over the management of the trust when the initial trustee (often the grantor) can no longer serve due to incapacity, death, or voluntary resignation. Potential successor trustees could include:
1. Close relatives (e.g., adult children, siblings).
2. Family friends.
3. Financial institutions.
4. Professional trustees.
The successor trustee's primary responsibilities include:
1. Managing the trust according to its terms.
2. Distributing assets to beneficiaries.
3. Handling administrative tasks such as paying debts and taxes.
4. Acting in the best interests of the beneficiaries.
It's important to note that the grantor can name multiple successor trustees or even create a line of succession to ensure the trust is always managed effectively.
By understanding these roles, one can better appreciate the flexibility and control offered by a revocable living trust in estate planning.
