Upon establishing a living trust, you need to fund it. Funding is the process of retitling assets from your name to your trust. The trustee of the trust is responsible for the management of all its assets. During your lifetime, that “management” must be for your benefit. Usually, you are the primary trustee and you manage the assets as you see fit, just as you would have if the asset were still in your name. So nothing has really changed so long as you are alive and are not disabled.
What Does a Trust Do?
A living trust should always contain language that, at a minimum, performs the following:
- Defines disability
- Lays out clearly what must be done to establish that a trustee has become disabled
- Designates one or more successor trustees
- Provides for the distribution of your assets upon the your death
Upon disability being established, the successor trustee is immediately and automatically in charge of the trust’s assets. There is no need for any court proceeding. The successor trustee must administer the trust by using the assets and income of the trust for the benefit of anyone (yourself, a spouse, etc.) whose support, during your lifetime, is provided for in the trust. A durable general power of attorney also grants authority over your assets (usually upon your incapacity) to an agent you name.
A living trust also provides for the distribution of your assets upon your death. The successor trustee you named is immediately and automatically in charge of the trust’s asset when you die. The successor trustee will notify all financial institutions necessary that you have died and that he or she is the successor trustee. The trustee will have to provide a death certificate and probably certain pages of the trust to satisfy the financial institution that he or she is the named successor trustee.
Thereafter, the successor trustee pays your funeral expenses, debts, and taxes and then distributes the remaining assets as you set forth in the trust. This may be as simple as an outright distribution, or it may be in further trust (perhaps because you had a minor or disabled beneficiary and you did not want that beneficiary to receive the distribution directly). Once all assets are distributed the trust ceases to exist and the successor trustee is done. In such a case, there is no need for court filings, no accounting to any one besides the beneficiaries, and no waiting for approval.