How is a trust administered while you are alive?
During their lifetimes, the creators of a revocable living trust (also known as Trustors, Grantors, or Settlors) are typically the ones administering the trust. As the party in charge of administering the trust, they are also known as the Trustee. While the Trustor is competent and alive, administration is typically very informal. More often than not, the Trustor may not see or experience any difference in life prior to, or after, the creation of the trust.
It's important to remember the steps needed to ensure that the trust will help the Trustor achieve the estate planning objectives--usually probate avoidance and that beneficiaries are properly provided for.
Some of the biggest stumbling blocks faced by Trustors is the failure to properly re-title assets in the name of the trust and updating beneficiary designations on assets such as retirement accounts and life insurance policies so that they can be distributed without the need for probate. Because of the technicalities involved, an estate planning lawyer often provides guidance to the Trustor on how assets should be dealt with to avoid probate.
All income of a revocable living trust is reported on Trustor's personal income tax returns. In addition, while a Trustor of a revocable living trust is also the Trustee, no other beneficiary of the trust has the power to compel the Trustee. California Probate Code Section 15800 provides as follows:
Except to the extent that the trust instrument otherwise provides or where the joint action of the settlor and all beneficiaries is required, during the time that a trust is revocable and the person holding the power to revoke the trust is competent:
(a) The person holding the power to revoke, and not the beneficiary, has the rights afforded beneficiaries under this division.
(b) The duties of the trustee are owed to the person holding the power to revoke.
One of the beauties of utilizing revocable living trusts in California is that for all practical purposes, the creator experiences no change in day-to-day life. The primary hurdle is to ensure that assets are properly titled in the name of the trust; however, this is typically a one-time event that is taken care of at the time of the creation of the trust. Once the trust is in place, a Trustor should take care to ensure that subsequently acquired assets are placed into the trust, as appropriate.