Back to Basics: Estate Planning 101, Part IV

Every estate plan should include a living trust. A living trust is different from a trust and should be part of your estate plan along with a last will and testament and power of attorney (financial and medical) documents.


Why a living trust is an important estate plan document

A living trust is a written legal document that partially substitutes for a will. With a living trust, your assets (your home, bank accounts and stocks, for example) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die. Living trusts, have great value as part of estate planning, but not necessarily to avoid probate. A living trust, if properly prepared and administered, can be a very effective tool to manage assets in the event of illness, disability or the effects of aging. In light of the aging population, the use of living trusts to minimize the risk of elder financial abuse and address similar issues, should be an important consideration in an estate plan.

  • A living trust can help you avoid probate.
  • The Trustee (not you) owns the assets that are placed in a trust.
  • The Settlor controls the assets.
  • When you die, only your property (not the trust property) goes through probate.
  • Think of it as a corporation or a separate entity.


A settlor is the person (or other entity) that establishes a trust. The settlor goes by several other names: donor, grantor, trustor, trustee, creator, trust maker, trustor, settler and trustee all refer to the same person, the creator and manager of the trust. Unlike an irrevocable trust, the settlor maintains control of the assets she places into it. She can sell them, add others, or remove them for her personal use. As manager of the trust, he is the trustee, at least until his death.

  •     The duty of this person is to legally transfer control of an asset to a trustee, who manages it for one or more beneficiaries.


Factors to consider when preparing estate plan documents:

  •     Consult with a reputable lawyer experienced with estate planning.
  •     Compile an information sheet – list all your investments and valuable assets, making your estate much easier to draft the will and administer the estate.
  •     Include clear instructions – outline how you wish the assets and/or property to be administered.
  •     Keep your will in a safe place – ensure it can be easily found if needed
  •     Make sure the executor knows that there is a will and how to find it.


Estate planning is important because it preserves estate assets. Other benefits include ensuring that your money and other assets are inherited by the people you want, limiting tax liability, and saving heirs and beneficiaries trouble, money, and heartache.


This is Part IV of a continuing series on Estate Planning Basics. To access the whole series, select Part I, Part II, and Part III.  

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