A living trust is the beginning of a long term care plan. Well, I should say – when I draft a trust agreement for my clients, I structure it to contain provisions that help families manage assets in the event one or both of the original Grantors become ill.
A Living Trust is simply a legal entity created by a trust agreement, i.e., paper work. The person who creates the trust is called a “Grantor” or sometimes a “Trustor.” The other person in a trust is the “Trustee.” The Trustee is the person responsible for the property. When we set up a Living Trust, the Grantor and the Trustee are usually the same person. If you were my client and we set up your Living Trust, you would be the Grantor, i.e., the person who created the trust and you would also be the Trustee, i.e., the person who controls the trust and its property.
The other person is the “beneficiary.” This is the person who is entitled to receive the benefit of the trust. In your case, you would also be the beneficiary of the trust during your lifetime. When you pass, your heirs, usually your children or other family members, would be the beneficiaries of the trust. No need to go to probate to make that happen.
Trusts help people manage long term care… because, as people age, they often lose the ability or the interest in managing their affairs. When a person is unable or unwilling to manage the trust, the trust agreement spells out who steps in and manages the trust and under what rules. Protections are built to ensure that everyone is on board and the assets are safe. This avoids the need for a guardianship and puts into place a solid plan in advance so that wealth is not lost or wasted.
One of the protections that can be put into place… is simply an accounting and reporting requirement. Depending on the nature and size of the assets as well as the family dynamics, the successor trustee may be required to account for and report to all beneficiaries on a monthly basis. This keeps everyone honest.