A lot of people may have heard that a probate court proceeding is usually frowned upon and it is something that most family members should avoid going through especially during a time of loss and mourning. However, it is also something that must be seriously taken in consideration primarily because no one should have to deal with costly litigation and prolonged court procedure before the estate assets will be disposed or transferred to the intended beneficiaries.
Thus, one of the smart and legal strategies to bypass a probate proceeding is through a trust. And of course, this needs to be properly administered. Else, it will be considered a sham and there will be legally no trust for us to speak of.
Revocable trust vs irrevocable trust
When a trust is being set up during the lifetime of the person, such trust is revocable. This means that the person creating the trust or the trustor may have the freedom to alter the details set forth in the trust. However, when the person dies, the trust may lock up and will be deemed irrevocable. This means that the terms as set forth in the trust can no longer be changed.
Who are the parties to a trust?
There are 3 fundamental parties to a trust: the trustor, the trustee, and the beneficiary.
The trustor is the one who creates the trust. He is also known as the grantor, settlor, or a donor. In a living trust, he has the right to alter the trust. Here, the trust is revocable. Oftentimes, two or more people will decide to create a trust. They are collectively known as trustors or grantors.
The trustee is the person who is responsible in the management of the trust. In a living trust, the trustor is at the same time, the trustee. However, in cases of incapacity or death, the trustor may no longer be able to serve the function of a trustee. The “successor trustee” now steps in and takes over the original trustee, ergo, trustor in the management and distribution of the assets to the beneficiaries based on the terms and conditions set forth by the trustor in the living trust agreement.
The beneficiary is the one who ultimately benefits from the trust. There are different categories of beneficiaries. The primary beneficiaries are considered to be the first ones who gets to benefit from the trust assets. In a living trust, the primary beneficiary is the grantor and the grantor’s wife and children. The contingent beneficiaries are the ones who are entitled to receive the benefits of the trust assets after the primary beneficiaries have received the benefits of the trust assets.
Benefits of a living trust
As mentioned, a living trust appoints a successor trustee who can immediately take care of the trustor’s estate especially during the end-of-life affairs such as funeral costs or the distribution of assets to the heirs. This significantly helps in saving time and money which may be incurred during a probate process.