Living Trusts: The Cast of Characters

 One of the most useful, flexible and cost-effective legal devices available is the Revocable Living Trust. If properly drafted and funded, a Trust can enable us to avoid probate and perhaps save hundreds of thousands of dollars of Federal estate tax. Its successful implementation depends not only on thoughtful planning and careful drafting, but also on the human factor, the people who are involved in the creation and administration of the trust.
The cast of characters identified in a typical living trust agreement includes the following:
1. The TRUSTOR, also known as the Grantor or Settlor, is the person whose property is being placed in the trust.
2. The TRUSTEE receives the property, holds it on behalf of the Trustor, administers and distributes the property according to the terms of the Trust Agreement. A Successor Trustee is one named to carry out these duties if the original Trustee becomes unwilling or unable to serve.
3. The BENEFICIARY receives distributions from the Trust. A Contingent Beneficiary is one who receives such benefits if a named beneficiary dies before becoming entitled to receive his or her Trust share.
Often, one person mentioned in a Trust will wear several “hats”: Typically, the Trustor will enjoy all the benefits of the Trust, as a beneficiary, during his lifetime. The Trustor of the Revocable Living Trust usually serves as its original Trustee. A Successor Trustee may be one who has been named a beneficiary, as well.
The careful selection of the Trustee or Successor Trustee is of particular importance. Ideally, the trustee should be someone who knows the Trustor, understands and appreciates his or her goals, values and philosophies of investment and disposition. The Trustee serves in a fiduciary capacity. That means that the Trustee must behave with scrupulous good faith and candor toward the Trustor and the Beneficiaries.
The Trustee doesn’t have to be an attorney or an accountant, each of whom can be “rented” as needed. The Trustee must have integrity. (You can’t rent that.) The Trustee should have enough common sense to know when he/she needs to seek advice from an attorney or accountant, from a financial planner or a real estate professional.
By selecting Trustees wisely, the Trustor will maximize the likelihood that his/her wishes will be carried out.
Jerry Kessler practices law in Santa Clarita. For further information, you may contact him at 661-255-1001.