Palm Springs Living Trust

The big advantage to making a living trust is that property left through the trust doesn't have to detour through probate court before it reaches the people you want to inherit it.

In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it. The average probate drags on for months before the inheritors get anything. And by that time, there's less for them to get: In many cases, about 5% of the property has been eaten up by lawyer and court fees.

Still, not everyone has to worry about probate, and some people don't need a living trust at all.

To establish a living trust, an individual transfers title of his assets from himself as grantor, to a trustee of the trust (often the trustee and grantor are the same person), to administer for the benefit of himself and at least one other person. The trust may also name the remainder beneficiaries who will take after the grantor dies.

The beneficiaries get nothing until that person dies. It may be advisable to use a corporate trustee such as a bank. A substantial advantage of this approach is that a corporate trustee can act in perpetuity, whereas an individual cannot. Corporate trustees must provide accurate and detailed records of all transactions that take place in the trust, for however long the trust exists. Those records become what are known as an "accounting" of the trust, which may be required to be provided to a court or remainder beneficiaries. Corporate trustees also are required to manage the investments held in the trust. Laws have been updated in most states to allow a corporate trustee to act in a "directed capacity", meaning that the trustee is required to have oversight of the trust investments, but not the day to day management of them.

Individual trusts to establish a basic living trust, the Grantor signs a document called a declaration of trust, which is similar to a Last Will and Testament. In the document, the Grantor typically names himself or herself as trustee, and transfers assets to that trust (i.e., the transfer is actually made from the Grantor to himself, as Trustee). Because the Grantor is named as the trustee, he or she maintains full control over the assets.

After the Grantor, or the Grantor and Grantor's spouse (in the case of a joint trust) pass away, the person identified as successor trustee in the trust document generally assumes that role. The successor trustee transfers ownership of the assets in the trust to the beneficiaries named in the trust document. In many cases, the whole process takes only a few weeks and there are no lawyer or court fees to pay. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.

Grantor: The person who sets up the trust; also called the settlor, trustor, or trustmaker. Although the terms grantor and settlor are often used interchangeably, they are not technically the same. A grantor is someone who creates a trust while a settlor is someone who funds a trust. Since this is usually the same person, course has dictated their interchangeability.

Trustee: This is the person who will manage the trust assets. This also may be the settlor in a Revocable Living Trust, since the settlor wants to manage his or her own property. Some revocable living trusts "self settled trusts" (that is, the grantor is also a beneficiary of the trust).

Successor Trustee: Where the Grantor is a Trustee, the Successor Trustee is the person who will manage the trust assets when the Grantor dies, or in the event the Grantor becomes incapacitated. Upon the Grantor’s death, the Successor Trustee will immediately have the same powers that the Grantor had as Trustee to buy, sell, borrow, or transfer the assets inside the trust. Also, the Successor Trustee has the right to distribute the trust’s assets according to the Grantor’s instructions in the trust instrument. The Successor Trustee does not have the legal right to change the trust. The trust becomes irrevocable upon the Grantor’s death. The Successor Trustee has the right to manage the assets in the estate, but must do so for the benefit of the remainder beneficiaries. At the Grantor’s death, the Successor Trustee automatically takes over without court order, pays any debts, expenses and taxes directed to be paid by the terms of the written trust document, and then distributes the property to the trust beneficiaries. Where the trust is scheduled to terminate on the Grantor’s death, and the trust is merely a means of avoiding probate, the death beneficiary should ordinarily be named Successor Trustee.

Beneficiaries: The people who will receive the benefit of the trust’s assets are called beneficiaries. The grantor is often the original beneficiary. Those who take after the grantor's death are “remainder beneficiaries."

No. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name.

Generally, after your death, all property you owned -- including assets held in a living trust -- is subject to your lawful debts. For example, if your house is held in trust and passes to your children at your death, a creditor could demand that they pay the debt, up to the value of the house. Ownership of real estate is always a matter of public record, so creditors can always find out who inherited real estate. It can be more difficult for creditors to know who inherits other property, however (because a trust document, unlike a will, is not a matter of public record), and they may not bother tracking it down.

On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they're out of luck forever.