Living Trusts

A "living trust" is a trust which is funded with assets of the person creating the trust. The person creating the trust, often called the "settlor" or the "grantor," typically retains all the benefits to the property placed into the trust. In Ohio, the grantor can also be the trustee, although the grantor’s spouse or a trust company also often serves as trustee. The terms of a living trust are established in a written agreement signed by the grantor and the trustee. A living trust can be funded with bank accounts, stocks and bonds, a home and other assets. The terms of the living trust should provide for the disposition of the property in the trust both during the life and following the death of the grantor.

A living trust may have many purposes. A common goal is to avoid "probate." Assets within the living trust will generally not be subject to the jurisdiction of the probate court, either while the grantor is living or following the grantor’s death. Assets owned in an individual name and not contractually payable on death will generally be subject to probate.

It is a common misconception that estate tax savings can be achieved with a living trust, but not with a will. While use of a living trust will avoid probate proceedings, avoiding probate does not mean avoiding estate taxes. The assets in a living trust are part of a person’s gross estate for estate tax purposes, just the same as probate assets. However, both the will and living trust, when properly written, may include estate tax avoidance techniques that may save substantial tax dollars for the benefit of the family.

A living trust may provide a structure for the management of a person’s assets. This structure could be particularly useful if the trustee has investment expertise, such as a trust company, or the trustee retains investment counsel. The asset management function of a living trust can become particularly important if the grantor becomes incompetent or is otherwise incapable of handling financial affairs. If a living trust is in place, it is not then necessary to have a guardian appointed by the probate court to administer properly the now incompetent grantor’s assets.

The drafting of a living trust requires professional judgment to ensure best results for you.

A living trust is one which assumes a legal existence while the person creating the trust is still living. It is this form of trust which typically provides the most planning advantages.

It may be revocable or irrevocable.

A living trust should be distinguished from a testamentary trust, which is one which only comes into existence upon the death of the creator. It can still provide planning advantages, but it is typically less advantageous than a living trust.