A living trust is an extremely flexible estate planning tool and be used for a number of reasons. Sometimes a living trust is used as a will substitute in order to avoid the expense and delay of probate. Unlike a will, a living trust is a private document. A will is a public document and a copy of it can usually be obtained from the local probate court. A trust, however, is a private document and is not typically filed with the probate court. If title to the asset has been transferred into a living trust, that asset would avoid the probate process upon the death of the grantor.
The key to making a trust work is the transfer of title of the assets to the trustee. When the grantor of the trust creates a trust and transfers the title of the assets to the trustee, upon the grantor’s passing, the successor trustee holds title on behalf of the beneficiaries and the assets titled in the trust do not have to pass through probate.
A living trust is an especially effective vehicle when an individual owns real estate in two different states. By transferring the title to the real estate in both states to the trustee, the grantor avoids probate in the state in which he or she resides, as well as the state where the other property was owned.
Another common reason for using a living trust is to protect against a probate conservatorship proceeding upon the disability of the grantor. For example, if an individual creates a living trust and then subsequently has a stroke and becomes disabled and unable to manage his or her financial affairs, the assets in the trust can be managed by the successor trustee – not by a court appointed conservator. The assets are not owned in the grantor’s individual capacity, but rather, by the trustee, or successor trustee, of the grantor’s trust. Upon the grantor’s disability, the successor trustee assumes the trusteeship and manages the assets in the trust for the benefit of the grantor and consequently, the assets titled in trust can avoid the delay and expense of a court imposed conservatorship.
Another common reason for creating a living trust is to hold assets in the trust upon the grantor’s passing for the benefit of minor children or grandchildren. Creating a trust and choosing a successor trustee who will manage the assets for the minor children or grandchildren allows the grantor to provide for the beneficiaries’ college expenses, and their health, maintenance, support and the trust can also be drafted to provide for advanced educational degrees.
Additionally, by holding the assets in trust after the grantor’s passing and incorporating a spendthrift provision in the trust allows the assets in the trust to be protected against the beneficiaries’ creditors and their spendthrift propensities. Missouri law provides that the interest of a beneficiary which is held subject to a “spendthrift trust,” is sufficient to protect the assets from the creditors of the beneficiaries.
As individuals age it is also quite common for a parent to establish a living trust and name a son or daughter to serve as a co-initial trustee. The son or daughter named as a co-initial trustee will assist the parent with the management of the assets and the payment of the parent’s liabilities.