To set up a revocable living trust, you need to write a trust document. There are 3 key parties in a trust: the trust maker (also known as grantor or settlor), the trustee; and the beneficiaries.
As the name suggests, the trust maker is the person who makes and funds the trust. The beneficiaries are the people who receive the assets in the trust. The trustee manages the trust and its property.
In a typical revocable trust, the grantor usually acts as the trustee while they are still alive. When the grantor passes away, a successor trustee they have named takes over the management of the trust. The successor trustee is also responsible for distributing the trust assets to the beneficiaries after the grantor has died.
Once the trust agreement is complete and signed, the individual who set up the trust will fund the trust. This involves transferring his/her assets into the ownership of the trust.
The grantor/trustee will then manage the assets in the trust for the duration of their lifetime. Once they die, the successor trustee will take over management and distribute the assets according to the grantor’s wishes.
Once the assets have been funded into the name of the trust, the trust maker will not own property in his/her name. Instead, they will be owned by the trust and managed by the grantor/trustee. This is the key feature of a revocable living trust that prevents probate.
As a result of the way a living trust and trust laws are structured, probate is not required to transfer ownership to the beneficiaries when the grantor dies.
The successor trustee named in the trust agreement will legally step in as the administrator. The successor trustee will take control of retirement accounts and annuities, pay the grantor’s outstanding taxes and debts, and distribute the remaining assets to the beneficiaries named in the trust document.
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