A living trust is a trust a person creates during his lifetime. The person creating the trust is known as the settlor or grantor. The grantor retains all the benefits to the property placed in the trust, and often serves as trustee. The grantor can place bank accounts, real estate, stocks, or other property in the trust. During the grantor’s lifetime, he can amend or even revoke the trust at any time. The trust instrument should describe the disposition of the trust assets during the grantor’s life and after his death.
Trusts are often created in an effort to avoid probate. Assets in a living trust at the time of the grantor’s death are not subject to the jurisdiction of the probate court. The lack of probate court involvement has both advantages and disadvantages. One of the major advantages of a trust is privacy. Once a will has been submitted to the probate court, it becomes a public record. In Ohio, though not in Florida, the inventory of the estate’s assets also becomes a public record. Also, once established, a trust is usually less expensive to administer than is an estate. For an Ohio resident, a trust can also guarantee a spouse with children from a previous marriage that his assets will pass to his children as well as prevent a spouse from electing against the will of the other spouse. Florida law, however, allows a surviving spouse to claim a portion of both probate assets and trust assets, even if the assets are left to third parties, in order to avoid the possibility of one spouse disinheriting the other. Finally, if the grantor owns real estate in more than one state, a trust can be very useful to avoid having to open probate proceedings in multiple states.
However, creating a trust is not without its disadvantages. A trust is more expensive to set up than a will, and a trust does not eliminate the need for a will. Secondly, in order for a trust to work as designed, the grantor must ensure that all of his assets are transferred into the trust and that all assets acquired after the creation of the trust are registered properly in the name of the trustee. More importantly, the lack of court supervision means that the trustee does not have the same accountability to the court that an executor does and should the trustee fail to administer the trust fairly, the beneficiaries’ only remedy is a lawsuit.