With all the financial challenges and demands that confront us every day, it's sometimes difficult to steward our assets with an eye to the future while we struggle to survive and prosper in the present. Nevertheless, isn't it better to have a say in where our hard-earned resources go after we pass, and have that say while we're still alive? Wouldn't it be preferable for a reliable friend, associate or loved one to interpret our posthumous wishes as opposed to a judge?
A living trust helps to bypass courts in these matters. The question remains, how many trustees is a trust allowed to have?
What Is a Living Trust?
A living trust is a legally binding document executed by a person referred to as the grantor or trustor, conveying authority to another person or entity to manage and disburse assets on behalf of designated beneficiaries. The recipient of this responsibility is known as the successor trustee in the case of a revocable living trust and will have legal custody and control of the assets upon the death or diagnosed incompetency of the grantor. The grantor typically acts as trustee of their own revocable trust during their lifetime.
This doesn't mean that the successor trustee has absolute ownership. The arrangement is more akin to a manager whose dominion is subject to the parameters set by the living trust.
Shouldn't a Will Suffice?
A will is subject to probate in most states. Probate is the process whereby a court evaluates the will to determine its authenticity and conformity to the law. The executor or administrator of the will must take care to ensure that all property is inventoried and appraised before any assets can flow to beneficiaries. This person must also confirm that the debts of the deceased are paid in full.
The court will often require a hearing to approve the executor's plans and hash out any remaining questions. This can be a time-consuming and sometimes expensive course of action.
What Makes a Living Trust Different?
All asset management takes place after the death of the grantor in the case of a will. It falls to the executor, or a court-appointed administrator if there is no will, to have the estate probated if necessary. Its debts satisfied and related expenses must be paid before assets are distributed.
The trustor makes the decision of naming a trustee or successor trustee ahead of death. In fact, the trustee can assume custody of the assets ahead of the trustor's expiration, if the latter so chooses and specifies it in the trust document. This arrangement can ensure a smooth transition after the grantor dies. Another important difference is that a revocable living trust can be "undone" or changed at any time.
How Does a Living Trust Avoid Probate?
The living trust recognizes that the trustee is competent to carry out the wishes of the deceased dependably and in good faith. It's a legal declaration of confidence in the trustee to perform the tasks otherwise performed by a probate judge. It can be a much simpler way to go in terms of time, money spent and bureaucratic procedure.
Can a Trust Have Multiple Trustees?
Most states allow multiple trustees for living trust arrangements, but these trustees might differ on the management and disposal of the assets in question. This can create as much or more of a delay as probate. Disagreements may end up in court, a scenario the living trust was intended to avoid.
Some lawyers advise an odd number when determining how many trustees to appoint so any conflicts can be resolved with a simple majority vote. An experienced attorney can help to draft a document that foresees and addresses such eventual contentions.