By far the more popular form of trust is known as a “living trust.” Sometimes it is referred to as an “inter vivos,” which is Latin for “between the living.” A living trust is revocable, so it can be changed or revoked at any time. If you choose this route, you would, as the grantor, transfer ownership of whichever assets you choose to the trust. But here is the really great thing: You get to maintain control over everything. You can be the trustee of a living trust, or you can choose someone else.
Often within a family, parents may establish a living trust in which they are co-trustees, seeking guidance from financial professionals about how to manage investments held in the trust. Or perhaps one of the goals for moving assets to a trust is to take a break from managing assets. A trustee can be named to take over this responsibility. Because a living trust is revocable, the grantor maintains control and can decide at any point to relieve the trustee if he is not meeting expectations.
Parents creating a living trust may think about asking an adult child to serve as trustee. If there are other adult children who would also be beneficiaries, they might become jealous or suspicious of the trustee sibling. There is also the chance that parents may overestimate the true investment skills of their chosen offspring for the role of trustee.
What Happens at the Grantor's Death
If you are a sole grantor, your living trust becomes irrevocable at your death. If you choose to serve as trustee for your own trust, it is essential to name an alternate who will carry out the distribution of your assets after your death. The trustee will carry out the dictates of the trust, distributing property without the need to go through probate court. To make this process as seamless as possible, you should have what is known as a “pour-over” will. The term “pour-over” refers to how assets that may not have already been placed in the trust are now “poured” into it. This could include assets acquired subsequent to a living trust being created. Maybe you changed jobs and over several years earned stock options that were not available to you at the time you created your living trust. A pour-over will moves these into the trust upon your death.
Married with Children
A joint living trust set up by a married couple can remain revocable after one spouse dies. The surviving spouse would then become the sole trustee and would assume full control of the living trust. Following the death of the second spouse, the trust can continue as a single pot benefiting all of the children together. Or the trust can be splintered into separate trust shares for each surviving child.