What Is A Living Trust? Learn The Meaning Of
Creating A Living Trust
By: Josh S. Brown|LRL Writer
What is a living trust and how does it relate to the story of
Nancy Cruzan? Here is an example: one night, in 1983, Cruzan was hit by a car that put her into a coma.
Consequently, she was given an artificial feeding tube which kept her alive. Soon after, Cruzan's family
petitioned to have the feeding tube pulled. However, the involvement of the state attorney general got the
lower court's decision to be reversed, a decision that had kept her on a feeding tube in the first place. The
lower court's rationale was that the family of Cruzan had not shown proof that Nancy herself wanted to
discontinue having the feeding tube. Subsequently, the US Supreme Court reviewed the decision and sided with
the family of Cruzan. The implication of the Supreme Court's ruling was that a living trust had better
stipulate that, before a disaster happens, you should sign a living trust that expresses your wishes or
desires. This story illustrates the importance of having a living trust.
First of all, what is a living trust? To
understand that, we must understand what trusts are and how they work. A trust is an arrangement between three
parties: the beneficiary, the trustor, and the trustee. What happens is the trustor arranges to have his or her
property transferred to the trustee, who in turn holds it to be delivered to the beneficiary. The Latin term trust
corpus is the property that is held.
In answering the question, what is
a living trust,
here is another example. Suppose you are 75 years of age, and are nearing the end of your life. And let's assume
furthermore that you have three kids, whom you want to distribute your property to equally. What you can do is set
up a trust, which stipulates who is to get what property and/or how much. If you have a bank, then, in the event
that you die, your property would be held by the bank (who is the trustee), who in turn would distribute it to your
kids, who are the beneficiaries.
In terms of powers or authority, in general, the trustee manages the trust. Indeed, in
many cases, the trustee may take the property and invest it. In any event, the trustee must adhere to the
stipulations in the trust agreement.
The Two Types Of Living Trusts
First, you can have a trust that is created voluntarily, and these types of trusts, which
are usually written, are what called express trusts. Second, you also have what are called implied trusts. As the
word imply suggests, they are not written. Rather, they act as if there really were a trust. With express trusts,
there are two categories: testamentary trusts and living trusts. The creation of living trusts occurs during the
life of the settler before he or she dies. In short, as the above example demonstrates, it's a good idea to ensure
you have a living trust before you
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