Living Trusts

Understanding Living Trusts and Avoiding Living Trust Scams 

Prepared by the National Consumer Law Center, March 1998. For more information on this and other topics, visit their website at www.nclc.org.

Living trusts are more and more frequently being sold through high pressure sales tactics. Salespeople prey on seniors' fears that after their deaths, their life savings and assets will be stolen by the government or by predatory probate attorneys. This publication details practical advice that advocates can give older consumers on how to recognize living trust scams and how to evaluate whether a living trust is appropriate for them.

LIVING TRUSTS: THE BASICS

Definitions

Trust
A trust is a legal arrangement where one person (known as the "trustee") controls property given by another person (known as the "grantor" or "trustor") for the benefit of someone else (known as a "beneficiary"). Although it is not a requirement, with most living trusts, the grantors are also the trustees during their lifetimes, as long as they remain competent. Grantors name successor trustees to take over if they become incompetent or die, and to distribute the property after they die.

Living Trust
"Living trusts" are so named because they take effect while the grantor is still alive. In order to take effect, grantors must transfer their property and assets into the trust. Under most living trust arrangements, grantors, while still competent, are free to change the terms of the trust.

Will
A will is a legal document that gives direction about how to distribute property after death. It does not take effect until the person's death. 
Probate
Probate is the legal process that usually involves filing a deceased person's will with the local probate court, taking inventory of the person's property, paying all legal debts, and eventually distributing the remaining assets and property. If the person died without a will (this is called intestacy), the estate still must be probated and property will be distributed according to state law.

Living Will
This is different than a living trust. It is a health planning document that allows individuals to make health care decisions in advance, in case they become incompetent and unable to make those decisions on their own.

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