A living trust can be used to hold real property. Unlike a standard trust whereby a third-party trustee is designated to control the assets of the trust, in a living trust the owner of the property can act as the trustee. Should the owner of the trust pass away, the property will be transferred to a successor trustee at the choosing of the trustee. Successor trustees are typically family members of the original trustee.
Much like a standard trust, a living trust is not subject to probate court which is why many individuals hold property in a living trust. As the trustee and owner of property held in the trust, the trustee has the ability to alter the trust at anytime. Individuals who own property with another party may put their portion of the property in a living trust so in the event they die their portion of the property does not automatically go to the living partner which would be the case in other entities. In a living trust the trustee’s shares of a property will be protected and will not go to the other partner, unless indicated in the trustee’s will.
Purpose of Living Trust
A living trust is a legal tool that establishes a relationship dynamic between parties in which one party holds property on behalf of the other. The person who initiates and creates the trust is the trustor. The trustor transfers real property interests to a trustee. The trustee manages the property and holds the title during the duration of the living trust.
A trustee can be an individual or a company. In some living trusts, a trustor may designate the role of trustee to multiple people in order to maximize the chances of proper implementation of the trustor’s goals.
Trustees are compensated for their services; however, they are not entitled to any portion of the trust, unless otherwise indicated by the trustor. It is the trustee’s responsibility to act in good faith and make decisions that benefit the trustor’s beneficiaries.
Living Trust and Using a Will
Living trusts are commonly used in conjunction with a will. Much like a will, one of the purposes of a living trust is to divide a trustor’s property upon his or her death.
Individuals use living trusts for many reasons:
To avoid probate. Probate can take upwards of a couple years, while a trust may take only a few weeks. A living trust allows a trustor’s assets to be distributed more quickly to intended heirs/beneficiaries.
To save money. A living trust may be a cheaper alternative to the creation of a will, as wills are generally subject to go through the lengthy, and potentially costly, probate process.
To avoid or reduce property taxes.
To establish the line of succession of title holders upon a trustor’s death.
Privacy: Unlike wills — which are public record — living trusts are private.