Nichole Y. Shafer
Guest Columnist
When you buy a piece of furniture at the store or online, it doesn’t always come put together. Thus, you might have that sometimes dreaded job of figuring out the sequence to assemble the furniture in order to enjoy it for its intended purpose. In most instances when a piece of furniture requires some assembly, the furniture will come with directions.
In some ways, a trust can be thought of as the directions that are provided to the trustee. This is because trusts are most easily thought of as being sets of rules (like directions).
The trust creator or writer of the trust rules is called the trust “settlor” or “grantor.” The settlor or grantor of the trust is the first role of three primary roles for people involved in trusts. Because the trust creator or writer can write the rules of that trust, he essentially can be be as detailed as he wishes.
The second role is for the owner of the assets in the trust, who is called the “beneficiary.” The final role is for the person who ensures that the rules of the trust are followed. This final person is called the “trustee.”
The roles of people involved in trusts can change over time and can sometimes be occupied by the same person at the same time. For example, the settlor or grantor might also be the trustee of the trust.
If the trust is called a “living” trust, the settlor or grantor intends for the trust to take effect while the settlor or grantor is alive.
On the other hand, a grantor could have the trust rules set forth in the settlor’s or grantor’s last will and testament. If the grantor has the trust rules in the will, then the trust settlor or grantor intends for the trust to only have effect after the trust settlor or grantor is deceased. This type of trust is called a “testamentary” trust because testamentary trusts have effect only after the settlor or grantor is dead.
A testamentary trust is required by law to be supervised by the local probate court. That supervision includes regular reports by the trustee of all activity of the trust. The frequency of those reports is set by the probate court.
Then there are “revocable” trusts that are amendable, changeable or cancellable by the settlor/grantor at any time by the settlor/grantor while the settlor or grantor is alive. If the trust is not amendable, changeable or cancelled at any time by the settlor/grantor while the settlor/grantor is alive, the trust is called “irrevocable.”
A living trust can be revocable or irrevocable, depending upon whether the settlor or grantor can change the trust while the settlor or grantor is alive.
Living trusts that are irrevocable are most often used in the context of either asset protection (for high net-worth individuals who have high-risk jobs) or to protect assets against long-term care (nursing home or assisted living) in order to position people to be eligible for Medicaid or other assisted living financial assistance.
A testamentary trust can only be irrevocable, because the settlor or grantor is dead when the trust becomes effective, which means that the only person who can amend or cancel the trust is dead.
Nichole Y. Shafer is an Ohio-licensed attorney at Schroeder Law LTD in Putnam County. She limits her practice to business, real estate, estate planning and agriculture issues in northwest Ohio. She can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
