What You Need To Know About Living Trusts

Living Trusts play an important role in estate and financial planning, when enacted properly.  The problem, of course, comes when a document hasn't been updated to reflect the change in family dynamics, tax law or legal circumstance.  First and foremost, your trust must actually be funded, i.e., there must assets it actually controls. Assuming the trust is actually funded, the most important part of the trust is the identification of trustee and successor trustee.  These are the people who actually control the trust day to day management. What you want to happen with your trust is contingent on these people.   Typically, the trustee will be the grantor of property to the trust.  Usually, that will be you.  You grant property to the trust AND you are trustee.  You control the trust. You can change it. Cancel it. Do whatever you want.  Any income generated in the trust, flow to your 1040 to be taxed.  In actuality, you still own the property. In fact, the value of the asset in your trust will be included in your estate at your death.  Where the trust can be beneficial will be if you, again the grantor and initial trustee, become incapacitated or die. Then the person you named as Successor Trustee will step into the role to manage your trust.  And this is why your choice of Successor Trustee is SO critical.  Is your Successor Trustee still capable and willing?  Does he or she understand the ramifications and the potential effort required to manage your trust according to your wishes? Remember, a living trust, i.e., a revocable trust, becomes irrevocable at your death. Thus, only a court order can change the way you have chosen  for your trust to be managed AND who the people are who are appointed to manage the trust. Have things changed since you set it up? Maybe the Successor Trustee has become addicted to gambling, for instance..  Do you still want him then to manage your trust?   So, let me ask you.  Do you have a Living Trust? Yes?  When was it drawn up? Have things changed since then? Is it funded? Who is the Successor Trustee? What powers have you granted that person? Finally, do you really even need it? You really should be able to answer all these things.  If you can not, I recommend you seek competent counsel.