Living Trusts
A living trust is established by an individual (called either a Grantor or Settlor) during his or her life pursuant to a written agreement. The Grantor is usually a trustee and is often the sole trustee. A co-trustee to serve with the Grantor and at least one or two successor trustees are also typically named in the trust instrument. Upon the Grantor's incapacity or death, the co-trustee or the successor trustee will continue the management of the trust's assets in accordance with the terms of the agreement. The living trust is typically drafted to be fully revocable and amendable during the Grantor's lifetime, as a Will. Since it is fully revocable, for estate tax purposes the trust is part of the decedent's gross estate at death in accordance with Section 2038 of the Internal Revenue Code. Likewise, since the trust is revocable, it is a Grantor trust for income tax purposes, which means, that the accounts transferred into the trust will typically bear the Grantor's social security number (as long as the Grantor is a trustee) as it is essentially an alter ego of the Grantor. The living trust provides no asset protection for the Grantor until the Grantor's death when it becomes irrevocable. The living trust will contain the majority of the Grantor's dispositive estate plan. The plan should also include a pour over Will which will pour over the decedent's property into the living trust where the Grantor's assets will be distributed.
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