Thinking about death, especially your own death, can be uncomfortable. Add to that the issue…
A living trust is a written document that creates a form of ownership in which assets originally owned by the grantor of the trust are legally re-titled in the name of a trustee (who can be the same person as the grantor) who manages the assets for the benefit of the trust’s beneficiaries named in the writing. Creating a revocable living trust is the most effective means of avoiding probate and guardianship.
It is safer than joint ownership to avoid probate because the trustee named by the grantor does not personally own the assets of the trust, as is the case with joint property; the trustee hold title to the assets IN TRUST for the benefit of the beneficiaries named in the trust.
The usual living trust names the grantor as the initial trustee and initial beneficiary. This means that the grantor both manages the trust assets as trustee and is entitled to the benefit of the assets as beneficiary. However, instead of naming the grantor as the initial trustee, a grantor may name a bank, trust company or individual as the initial trustee.
The trust also lists the beneficiaries entitled to receive the assets when the grantor dies. This part of the trust is similar to a will’s dispositive provisions (the paragraphs of a will that say who gets what). The trust also names who will be the successor trustee after the initial trustee dies or becomes incapacitated.
A trust is created by signing a written trust agreement. After the trust is created, assets of the grantor must be separately transferred to the trust. This is how the trust avoids probate as to the assets placed in the trust; upon the grantor’s death or incapacity the assets of the trust are owned by the trust and not by the grantor. Of course, assets which have not been transferred to the trust and which remain titled in the grantor’s name at death (except for life insurance and other assets which avoid probate on their own) are subject to probate after the grantor’s death the same way as they would be without a trust. Therefore, most assets should be placed in trust if probate avoidance is the primary goal.
In the early 1990’s, Florida law governing trusts changed so that after the grantor dies the trustee named in the trust must notify creditors and others of the existence of the trust (but not the terms of the trust). If there is no probate estate, the trustee must follow certain claims procedures similar to those in probate to assure that the decedent’s creditors are paid what is due them after the grantor dies. For that reason, it is sometimes advisable to establish a probate proceeding for the purposes of administering the claims process upon the grantor’s death. However, trusts are still worth creating because living trusts can simplify the administration process, and assets held in the trust can be shielded from public view.