Kristi Hartmann Discusses The Virtues of a Living Trust on KMBZ by Entrepreneur Files with Andrew Ellenberg

You don’t have to be a millionaire to benefit from a properly structured living trust. Most people should have one as it saves big money in administrative costs. In many cases, the client’s goals cannot be met any other way.

A living trust sometimes called a "revocable" trust is a written legal document through which your assets are placed into a trust for your benefit during your lifetime and then transferred to designated beneficiaries at your death by your chosen representative, called a "successor trustee."

What makes it a “living” trust is that once it’s signed it’s immediately in effect while you’re still alive. In stark contrast, once a last will and testament is signed it does not take effect until death. “There are three parties to a living trust. First is the settlor, the individual who comes to me and wants to set up a trust and fund it with their own stuff. Then there is the trustee who is the person appointed to manage it, usually the same person as the settlor,” said Hartmann.

The law defines a "trust" as an arrangement whereby property is transferred from the settlor with the intention that it be held and administered by the trustee for the benefit of the beneficiaries. In some cases there is more than one settlor and more than one trustee.

If a married couple creates a trust and names themselves as trustees, each spouse is a settlor and a trustee. Not only is the settlor and the trustee usually the same person, sometimes that person is also the beneficiary. However, the settlor cannot be the sole beneficiary. Otherwise the trust would serve no purpose.

The settlor can also be a bank or trust company but the trustee is given legal authority to manage assets. They are authorized to sell trust assets, buy assets, invest assets, borrow against them as collateral.

“I tell clients when you set up trust you’re the settlor and trustee so you’re not going to feel any differently than you felt prior to setting up trust. But once it’s created you have full control over your estate,” Hartmann told KMBZ.

The third party to a living trust is the beneficiary. Usually the settlor is also the beneficiary of their own trust while living and typically a spouse in a joint trust scenario. When you first create the trust you are the beneficiary of your stuff just like you were before created it but upon death you lay out clear instructions about who succeeds you as the beneficiary of assets.

Living trusts operate under your social security. Certain types of trusts will operate under a separate Federal ID but those are for tax and special needs planning. Living trusts will still file under your social security number. Upon death usually the successor trustee will have to get a Tax ID number for the trust to wind down the affairs of the trust and make the distributions.

The most common goal is to avoid the probate process. The living trust is a private document that does not have to be filed with the court upon death as long as everything goes as planned. There is however, a lot of trust litigation over trust assets. The trust is a private document that upon death of the settlor or the person who funds it with their stuff grants the successor trustee immediate authority to make distributions according to your wishes without oversight of the probate court.

Living trusts reduce administrative costs and also increase the efficiency of the distributions of the estate. However, Hartmann cannot emphasize enough that the trust is literally worthless unless you transfer titled assets to the trust assigning personal property, vehicles, business interests, a signed deed for real estate transferring from you individually to you as trustee of your trust and so forth. She will walk you through the process and help you fund the trust so you don’t have to do it yourself.