Living Trust Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Living Trust, written in plain English, along with examples of how it is used.
What is Living Trust?
(n) A living trust is the execution of a trust during the life time of trustor where by he forms a trust by transferring his property into that of the trust. Life time trusts are formed to separate a property for a specific cause there by it will not be subject to the general risk and obligations attributable to his or her properties during the life time of the testor.
History and Meaning of Living Trust
A living trust, also known as a revocable trust, is a legal document created during the lifetime of an individual that spells out how their assets will be managed and distributed after their death. The person creating the trust, also known as the grantor, transfers ownership of their assets to the trust, which is managed by a trustee chosen by the grantor. The grantor can serve as trustee during their lifetime, retaining control over their assets, but upon their death, the successor trustee takes over and manages and distributes the assets according to the grantor’s wishes.
Living trusts gained popularity in the United States in the 1980s as a way to avoid probate, a legal process required to validate a will and transfer assets to heirs. Living trusts are often used by people with substantial assets or complicated estates, but they can be useful for anyone looking to simplify the estate planning process and ensure their assets are distributed according to their wishes.
Examples of Living Trust
- John created a living trust and transferred ownership of his property and investments to the trust. He named his daughter as the successor trustee and instructed her to distribute his assets equally among his three children upon his death.
- Mary and her husband created a joint living trust to hold all of their assets, including their house, retirement accounts, and investments. They named each other as co-trustees and named their children as successor trustees in the event both of them pass away.
- Tom created a living trust and named his sister as the trustee. He instructed her to manage his assets in the trust during his lifetime and distribute them to his chosen charities after he passes away.
Legal Terms Similar to Living Trust
- Revocable trust: Another name for a living trust that refers to the fact that the trust can be changed or revoked by the grantor during their lifetime.
- Irrevocable trust: A trust that cannot be changed or revoked by the grantor once it has been created.
- Testamentary trust: A trust that is created in a will and comes into effect upon the death of the person creating the will.