When a trust is created during the lifetime of the owner, it is commonly referred to as a living trust. If the trust is created under the terms of a will, it is called a testamentary trust, which becomes effective at the time of death. A living trust can also be a revocable trust. A revocable trust means that the trust creator, or “settlor,” also has the power to revoke or amend the trust. The settlor can be the beneficiary of the trust, and can also be the trustee of the trust. A trustee is the party who is appointed by the settlor to enforce the trust’s provisions. The settlor can also appoint others to be the beneficiaries and the trustee. Living revocable trusts are used because they may allow assets to pass to heirs without going through the probate process. Avoiding probate can save costs, time and frustration, and because probate records are public and the distribution of property through a trust remains private, a living trust will maintain privacy. A living trust may also be a plan for unforeseen circumstances such as incapacity or disability, by giving discretionary powers to the trustee. Living trusts are also beneficial to ensure that children and grandchildren inherit what the settlor intended them to inherit.
Consider the following example: Suzie has three adult children–Sam, Sarah, and Shannon. Sarah and Shannon each have two children of their own. Suzie’s will provides that each child will receive one-third of the estate. Suzie dies, and each child receives $200,000. Sam uses the money to buy a house with his wife. They then divorce, and the judge awards Sam’s wife the house. He is left with nothing. Sarah, ambitious but with little business sense, uses the money to start a business. The business fails, and she and her children are left with nothing. Shannon puts the money in a savings account in his name, but his Will provides that his wife gets everything. Shannon dies, and a couple of years later his wife remarries. Sometime after that she dies, and the new husband gets everything. Her children, Suzie’s grandchildren, are left with nothing.
Variations of the above scenario are not uncommon with the changing face of the present-day family. Ensuring your assets are protected by trust helps prevent unintended beneficiaries from ending up with your estate.
The Law Corner Attorneys help people all over Wake County to include the following areas: Knightdale, Wake Forest, Raleigh, Morrisville, Apex, Wendell, Zebulon, New Hope, Cary, Rolesville, Fuquay-Varina, Holly Springs, and Garner.