A living trust is used in estate planning to secure assets for family members and future generations. Anyone can create a living trust. In fact, an individual can create a living trust without the assistance of an estate attorney or titling company. A living trust is good in all states.
A trust grantor sets up a living trust. A trust grantor must provide detailed instructions on the manner in which assets should be distributed to beneficiaries and the powers a successor trustee can take on behalf of the trust. The grantor documents such instruction in a trust deed, which can be revocable — meaning it is subject to modification once created — or irrevocable — meaning it is not subject to modification once created.
A living trust is recognized in all 50 states as a legally valid entity. A living trust possesses the power to hold title on property, distribute funds to and from financial accounts and mortgage trust property, for example. According to TrustMakers.com, “A living trust can provide a means of accessing favorable taxation treatment.” A favorable taxation treatment is had by providing beneficiaries of living trusts with "tax-free threshold," which, as of 2009, is set at $13,000.
One of the most common reasons to set up a living trust is to pass along assets to minor children and relatives. Because a trust can benefit any relative of a family, a trust grantor can be sure her assets are distributed in accordance with her instructions. In most cases, a living trust is not contestable. This is because a trust grantor remains in control of a revocable trust throughout his lifetime.
A living trust is valid in all 50 states regardless of the trust grantor, successor trustee or beneficiary’s state of residence. If one or all of the parties involved in the trust relocate, the living trust is still valid.
It is not necessary to record a trust deed. However, recording a deed at a county recorder’s office could eliminate questions about trust property later. Pennsylvania is among the states that require a trust grantor to record the transfer of real estate property with the county clerk or recorder’s office once the transfer is made. It may not be necessary to record the complete trust deed.
Charlie Gaston has written numerous instructional articles on topics ranging from business to communications and estate planning. Gaston holds a bachelor's degree in international business and a master's degree in communications. She is fluent in Spanish and has extensive travel experience.