There are a number different trusts that can be used when you are planning your estate. The trust that is most widely utilized is the revocable living trust. There are irrevocable trusts that can satisfy complex objectives, but they are appropriate for a limited number of people. In this hypothetical conversation, we will focus on trust administration for revocable living trusts.
What is the basic structure of a revocable living trust?
If you were to establish a revocable living trust, you would be called the grantor or the settlor. The trustee is the individual or entity that administers the trust. Beneficiaries are also named in the trust agreement. The beneficiaries can receive monetary distributions from assets that have been conveyed into the revocable living trust.
Can I act as the trustee while I am living?
The answer to this question is yes, the grantor of the trust will typically serve as the trustee, and the grantor will also be the beneficiary throughout his or her life. A successor trustee is named in the trust declaration, and successor beneficiaries are also named.
Who can act as the successor trustee?
Any adult that is of sound mind that is willing to assume the responsibility can act as the trustee of a revocable living trust. There are also professional fiduciary entities such as banks and trust companies that can be paid to administer revocable living trusts.
Is it better to use a person that you know or a professional as the trustee?
If a person is named as the trustee, there would be a certain set of concerns. First of all, you may not know someone that is qualified to administer a revocable living trust. You also have to find a suitable individual that has the time to take care of all of the tasks involved, and in some cases, a lot of work is required.
In many trusts, there are appreciable assets, and investments must be made, so a certain degree of expertise is required. The anticipated longevity of the trustee would be another variable to consider. It is likely that you would select someone that is mature, so the trustee could pass away or otherwise become unable to administer the trust at some point in time.
Conflicts of interest can be another consideration. For example, let’s say that there are multiple siblings that are beneficiaries of a revocable living trust. Sometimes, a trustee will be forced to make discretionary decisions with regard to monetary distributions. If there is any favoritism, or the appearance of favoritism, problems can arise.
When a professional fiduciary is utilized, none of these concerns would enter the picture. The assets would be handled by financial professionals, and there would be no longevity issues or conflicts of interest. Plus, the fiduciary would know exactly how to proceed with regard to the legalities of trust administration.
How often are assets distributed to the beneficiaries?
One of the advantages that a living trust provides over a last will is that you have options with regard to the way that the assets are distributed to the beneficiaries. With a will, everyone that is named in the document would receive their inheritances in lump sums. This can be disconcerting if you have someone on your inheritance list that is not very good at managing money.
Things are entirely different when a revocable living trust is used as a primary asset transfer vehicle. If you wanted to include spendthrift protections, you could instruct the trustee to distribute limited assets over an extended period of time.
For example, if invested assets are earning $30,000 per year, you could instruct the trustee to distribute $2400 each month to the beneficiary. You could subsequently allow for larger, lump sum distributions when the beneficiary reaches prescribed age thresholds.
Learn More About Trust Administration!
If you are interested in the possibility of creating a revocable living trust, we would be more than glad to explain all the benefits to you in detail and answer any questions that you have about trust administration.
You can schedule a consultation right now if you give us a call at 513-721-1513. There is also a contact form on this website that you can use if you would prefer to send us a message electronically.