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Revocable Trusts

Revocable, or "living" trusts, are often established by individuals who fear they will be unable to manage their own affairs at some point in the future. Typically, this condition results when the individual:

� Is mentally or emotionally impaired because of advancing age or physical infirmity.
� Is living or traveling in a remote part of the world and cannot effectively look after his or her affairs in the U.S.
� Is involved with business or personal activities and chooses not to focus full-time on financial matters.

Here is how a living trust works:
� The individual (the "settlor" or "grantor") transfers ownership of certain assets to the trust.
� The assets are managed by a trustee according to the terms of the trust agreement.
� The settlor can change or abolish the trust agreement during his or her lifetime.
� When the settlor dies, the assets are distributed according to the terms of the trust � without regard to the settlor�s will.

A revocable trust has these advantages:
� The settlor can be the trustee.
� The trustee can manage the financial affairs of individuals who are not able to devote the necessary time to this responsibility.
� The trustee can administer the affairs of a disabled person without a formal court proceeding.
� When the settlor dies, the assets in the trust avoid probate. This often allows them to be distributed to survivors more quickly than under a will and sometimes confidentially.
� A trust can sometimes hold property located in another state, thus sometimes avoiding the need for ancillary administration.

A durable power of attorney is sometimes used in place of a living trust. However, a durable power of attorney terminates at death, so there is no uninterrupted administration of assets after the settlor�s death as there is with a living trust.

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