A trust is the
legal relationship that is created when a person transfers “stuff” to a trustee with the understanding that the
trustee will manage it for the benefit of one or more beneficiaries.  We use the
term “stuff” to mean any kind of property you can own.  It includes both real property—such as land and buildings—and personal property—such as bank accounts, stocks and bonds, and
personal effects.  The person who
transfers the stuff to the trustee is called a trustmaker.  This person is
also known as a settlor, grantor, or trustor.  Usually, the
trustmaker is also the trustee (or perhaps co-trustee) and the initial
beneficiary of the trust.  It is not
uncommon for husbands and wives to create two separate trusts and to be the
co-trustees of both of their trusts during their joint lifetimes, and then,
after the death of one spouse, to have the survivor serve either as sole
trustee or co-trustee with one or more other individuals or a trust company.

A trust is
controlled by a document called the trust
(sometimes called the trust
).  The trust agreement
sets out the rules about how the trust will be run.  We often refer to a client’s set of estate
planning documents as their “rule book,” and the trust agreement is the part of
the rule book that controls the trust.

If the trust
agreement says that the trustmaker can revoke it or change it, the trust is
what we call a revocable trust.  If the trust agreement does not allow the
trustmaker to change or revoke it, we have what is called an irrevocable trust.  Irrevocable trusts are used in many estate
plans.  They allow trustmakers to make
gifts but keep the recipients from having complete control over the gifted assets.  Irrevocable trusts play an important part in
many estate plans.  They can help provide
tax savings, creditor protection, and expert management of assets.

A living trust is one that you create and fund (transfer stuff into) during your
lifetime.  It can be revocable or
irrevocable, depending on how much control you want to maintain over the trust
and its assets.  A revocable trust gives
you complete control, whereas an irrevocable trust gives you limited or no control.  A testamentary
trust is one that goes into effect and is funded following your death because
it is governed by your last will and testament.

You remain in
control of your trust assets as long as your trust is revocable.  The trustee is bound by the trust
agreement.  You have final say over what
the trust agreement says, and
failure to abide by the trust agreement can make the trustee personally liable
to the beneficiaries, including yourself. 
This means that if the trustee messes up, that person may have to pay
for the mess out of his or her own pocket. 
Most often, the trustmaker of a revocable living trust is the initial
trustee.  In that situation, the
trustmaker does not have to worry about anyone questioning his or her
management of the trust.  In fact,
potential beneficiaries have a vested interest in not doing anything that might cause the trustmaker to revoke the
trust or change the trust agreement in order to exclude a troublemaker.  This is a simple demonstration of the “golden
rule” of estate planning:

The One who hath the Gold maketh the Rules


If your kids are good kids, they
won’t stick their noses into what you do with your trust.  If they are bad kids, hopefully they are
smart kids and will at least act like good kids as long as you’re alive because
they won’t want to be disinherited.  If
you do not have any children—or don’t have any that you like—don’t assume that
revocable living trusts are not a good idea for you.  There are many good reasons for creating
trusts, and some of them may apply to your situation.  One reason that many people create revocable
living trusts is so that their stuff will not go through probate after they are gone, or through conservatorship if they become incapacitated.

Once assets are
transferred to the trustee, the trustmaker no longer holds legal title to
them—even if the trustmaker and the trustee are the same person.  Thus, if the trustmaker dies or becomes
incapacitated, the trust continues, and the successor trustee (who is named in
the trust agreement) takes over administering the trust. 

Trusts are often
the building blocks of effective estate plans. 
They provide simplicity, flexibility, and predictability in dealing with
your assets.  The also give you the peace
of mind of knowing that you have arranged your affairs to ensure that your
wishes will be carried out, and that future transitions (such as your
incapacity or death) will be much easier on your loved ones

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