What Happens When the Grantor of a Trust Dies?

By Belle Wong

What Happens When the Grantor of a Trust Dies?

By Belle Wong

The revocable living trust, commonly known as a living trust, is an important tool in the estate-planning process. Its flexibility lets the grantor of the trust continue managing its assets during their lifetime. But what happens if the grantor of the trust passes away?

Given the important role a living trust plays in estate planning, it's important to understand what happens when the grantor of a trust dies.

Death of the Grantor of a Trust

When the grantor of an individual living trust dies, the trust becomes irrevocable. This means no changes can be made to the trust. If the grantor was also the trustee, it is at this point that the successor trustee steps in.

There is one exception to this rule. If the living trust is a joint living trust with two or more grantors—such as when spouses decide to set up a living trust together—the trust will continue to function as a revocable trust if one grantor dies. Unless the terms of the trust state otherwise, the trust will not become irrevocable until the death of both (or all) grantors.

When the grantor dies, what happens to the property held by the trust depends on the terms of the trust. Most commonly, the trust will set out how the property is to be distributed among the beneficiaries, and the successor trustee will, as part of their duties, administer the property according to these terms.

Sometimes, particularly in cases in which the grantor's children are the beneficiaries of the trust, the trust may stipulate that beneficiaries are to receive income from the trust until they reach a certain age, at which point the trust property will be distributed to them. Parents may want to structure the trust's terms if they have minor children or wish their children to reach a certain level of maturity (say, age 30) before having unfettered access to the trust's assets.

The revocable living trust provides grantors the flexibility to manage the trust's assets during their lifetime while providing for the distribution of those assets upon their death. When the grantor dies, property held by the trust will be dealt with according to the terms of the trust, rather than the terms of the grantor's will.

Important Trust Terminology

Within the estate-planning process, the word "trust" comes up frequently. Important terms you should know about trusts include:

Grantor: The grantor is the person who creates the trust and transfers property to it. A grantor is sometimes known as the settlor or donor of the trust.

Trustee: The trustee is the person tasked with managing the trust's assets. In many revocable living trusts, the grantor takes on the role of trustee during their lifetime.

Successor trustee: In cases in which the grantor and the initial trustee are one and the same, the trust document will designate a successor trustee. The successor trustee is the person who takes charge of managing the trust's assets if the trustee becomes unable to do so.

Beneficiaries: The beneficiaries are the individuals who benefit from the trust. In many living trusts, the grantor is the beneficiary of the trust during their lifetime; upon their death, the benefits of the trust falls to the contingent beneficiaries.

Revocable trust: Living trust most commonly refers to a revocable living trust. With this type of trust, the grantor retains the right to transfer assets in and out of the trust, change the trust's terms, and even terminate the trust.

Irrevocable trust: Unlike a revocable living trust, no changes can be made if a trust is irrevocable.

Will vs. Living Trust

A living trust is not meant to replace a will. In most cases, you still want to have a will to take care of any assets not held in the trust.

If you've set up a living trust and are working on drafting your will as well, you may be tempted to include provisions to deal with some of the assets you've placed in your living trust. After all, your will is the document that stipulates how you want your property to be distributed on your death.

However, you cannot use your will to state what happens to the assets being held by your living trust upon your death. In the eyes of the law, a trust is a separate legal entity. To transfer assets to your trust, then, you need to transfer the title (or ownership) of those assets to the trust.

This affects any provisions you might want to put into your will to deal with these assets. The bottom line is that f your living trust is holding the assets at the time of your death, those assets are not considered your property, and therefore you cannot stipulate how you want those assets dealt with in your will.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.