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A revocable trust (living trust) is created for the purpose of holding ownership to an individual’s assets during the person’s lifetime, and for distributing those assets after death.
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The living trust document itself names three different parties.
- The individual (or couple) that establishes the trust is named the Grantor (also referred to as the Trustor).
- The Trustee is the person named by the Trust as the controller of the Trust’s assets (the grantor and trustee can be the same individual(s)).
- The Beneficiaries are the heirs that will benefit from the Trust once the grantor’s have passed away.
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The individual who creates the trust (the grantor) names a person who will serve as trustee and will follow the trust’s terms after the grantor dies. While alive, the grantor usually may serve as a trustee and control the assets even though they belong to the trust.
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It is called a living trust because it is created during the grantor’s lifetime, and takes effect during the grantor’s lifetime. By contrast, a will does not take effect until after death.
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For a living trust to take effect, title to the grantor’s assets must be transferred into the trust. For example, title to any bank accounts, stock certificates or real estate owned by the grantor must be transferred into the trust. The grantor must take affirmative steps to transfer assets and fund the trust. Merely executing the living trust itself will not cause the trust to become funded.
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Perhaps the biggest advantage of a living trust is that it does not have to go through probate, as does a will.
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Yes, Trustee(s) and Beneficiary(s) must be eligible for membership at InFirst FCU.
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To determine this, you should contact a professional tax adviser.
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Yes, you can! You can keep share accounts out of the trust if you wish and hold them separately from the trust itself. You can even designate the trust as beneficiary on your individual accounts if you would like.
Example: John Doe has established the John Doe Living Trust at the credit union. However, Mr. Doe would like to keep a separate share account at the credit union that is joint with his college-age son so that he can provide financial assistance to the son when needed. He may do so without using funds in the trust account or relying on his designated Trustee to transfer funds on his behalf.
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Living trust accounts are insured as a form of an individual account. The beneficiary doesn’t have to be a family member but must be a natural person or charitable organization. The funds in such accounts are insured for the owner up to a total of the $250,000 for each such beneficiary, separately from any other individual accounts of the owner. If the beneficiary is not one of those listed, the funds in the account that are attributable to that beneficiary are treated as an individually owned account of the owner, aggregated with any other individual accounts of the owner, and insured to the $250,000. In the case of a revocable trust account, the person who holds the power of revocation is deemed to be the owner of the funds in the account.
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When planning for the disposition of your estate, avoid dealing with anyone but a trusted and well-referred professional in your community. Do not agree to contract for any legal service from someone selling door-to-door or over the phone. If you have already purchased a living trust on that basis, take the time to show it to an attorney.
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A joint revocable trust account is a revocable trust account that is established by more than one owner and held for the benefit of others – some or all of whom are within the described qualifying degree of kinship.
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The respective interests of each co-owner held for the benefit of each beneficiary will be separately insured up to the $250,000. The interest of each co-owner will be deemed equal unless otherwise stated in the share account records of the federally-insured credit union. Interests held for non-qualifying beneficiaries will be added to the individual accounts of the co-owners. Where a husband and a wife establish a revocable trust account naming themselves as the sole beneficiaries, the account will not be insured as a joint revocable trust account, but will instead be insured as an ordinary joint account.
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Distributing Property to Children in Living Trusts
You can leave property to children through a living trust. Minor children in many states have the right to inherit the family residence. If you desire, you can keep the property in trust and designate an adult to manage the property on behalf of the child. This is called a children’s sub trust. The sub trust will end when the conditions you specify are satisfied, such as when your child turns 21 or graduates from college. If you want to exclude a child from your trust, you should state your intention explicitly. If it appears you unintentionally overlooked one of your children in the trust, a court may modify the trust for that child’s benefit.
Designating a Guardian
It is important to remember you cannot designate a guardian for your minor children through a living trust. You should do that through a traditional will.
