We here at FindLaw know that legal jargon can be confusing. We hear people misusing legal words and phrases all the time. So we've decided to help you better understand all the legal phrases tossed around on Law & Order. Here is a new educational series we like to call FindLaw's Legalese 101.
What is a living trust? What's the difference between a trust and a living trust? And, do you need a trust lawyer to draft your trust?
All of these are questions that most people find themselves asking about at some point, especially when you start planning for your future. And, many of you might have heard these terms get tossed around by friends and family.
What is a trust: A trust is something that can help plan your estate. Essentially, it can function as your "will" so that your last wishes will be encapsulated on paper and carried out after you pass on. A trust is essentially a contract-like arrangement where someone, called the "trustee," manages property for the benefit of another person, the "beneficiary." The person who creates the trust is a "grantor" and the grantor can be the trustee of his own trust. A trust is the umbrella term for two types of trusts, testamentary trusts and living trusts.
What is a testamentary trust: A testamentary trust is a trust that only transfers property into the trust when you pass on, so it will essentially be empty until then.
What is a living Trust: A living trust is a trust that is created in the grantor's lifetime. For example, you, the "grantor," can transfer property into a living trust while you are still alive. You can also make yourself the "trustee" so that you will be in charge of managing your property. The "beneficiary" can be whoever you want to inherit your property. Works kind of like a will, right? Except, there are some added benefits.
Why a trust at all: Trusts will avoid costly probate proceedings - where the court will process what property goes to which heir. Trusts can also allow for greater privacy in the distribution of assets, and for greater control over the property if the trust is made during the grantor's lifetime.
So, hopefully this answers the question, "What is a living trust?" and "What is a trust?" For many, hiring a trust lawyer to draft up a trust may add additional costs - but it may be worth it if you have complicated assets or if you have doubts about your own ability to draft one.