What is a Living Trust?
A living trust is an arrangement under which one person (a trustee) holds legal title to property for another person (a beneficiary). You can be a trustee of your own living trust and have full control over all property held in your trust. A living trust is simply a trust you create while you are still alive, rather than one created at your death under the terms of your will.
Do I need a Living Trust?
The main advantage in making a living trust is that property left in the trust does not have to be detoured through probate court before it reaches those you want to inherit. Probate is the court-supervised process of paying your debts and distributing your assets to the people who inherit them.
Probate can sometimes drag on for months before the inheritors get anything and by that time there is less for them because of various fees and costs involved in the process of finalising probate.
The Trust Deed
The trust deed is the document setting out the rules by which the trust has to be operated. It reflects the wishes of the people who established the trust and it has to be worded in such a way that everybody understands it. It needs to be carefully drafted so that it provides the flexibility needed to deal with certain matters.
Some things a trust deed has to contain include:
- The names of all the parties involved.
- The nature and purpose of the trust.
- The duties and powers of the trustees.
- The powers of the trustees to invest assets.
- Requirements when decisions have to be made by the trustees.
- How the bank account is to be operated.
- How records and the minutes are to be recorded.
Trustees
Any person who can own a property can be a trustee. A trustee is normally over the age of 20, except where the court gets involved and appoints someone to act as a trustee until the minor turns 20. An individual, therefore, over 20 years of age who is a member of a family, or a trusted friend or professional (accountant or lawyer) can be a trustee.
A trustee must be someone or a group that is reliable and who will accept the appointment made by the person who created the trust in the first place (the settlor). More than one trustee can be appointed and others can be appointed as independent trustees, as long as they have the expertise to manage the affairs of the trust.
How do you Become a Trustee?
A trustee is appointed through the trust document, signed by the settlor and the trustees. A trustee needs to be aware of his/her duties and obligations and they must be capable of acting as a trustee, or the settlor can remove them. You don’t have to accept the appointment of a trustee if you are asked.