Regardless of its type, a trust is composed of a grantor, a trustee and at least one beneficiary. The grantor creates the trust by transferring some of her property to a trustee. Prior to donating the property, the grantor or his attorney will draft a document that will state who the trustee and beneficiaries are as well as other relevant terms. The job of the trustee is to manage the donated property and to transfer the trust assets subject to the terms of the trust. The trustee is an agent, and must manage the property in the interest of the beneficiaries. The beneficiaries are the people named in the trust agreement who receive the trust assets.
A living trust is one that is created while the grantor is alive. The document that the grantor drafts for a living trust is called a trust agreement. Generally living trusts are revocable, which means that while the grantor is alive she can unilaterally change any of the terms of the trust that she wants. Many times a living trust will have the grantor also acting as a trustee or beneficiary. Living trusts can be irrevocable, preventing the grantor from unilaterally changing the trust’s terms. A chief advantage of a living trust is that its assets are exempt from probate. This means that when you die, the other beneficiaries to your living trust will have immediate access to the property. Under probate, the transfer of your assets to your beneficiaries can take quite a while. However, even if you are a beneficiary and trustee of the trust, you may have limited access to the assets in the trust.
A testamentary trust is one that is created after you die. Your will acts as a trust agreement and defines the terms of the trust, including who is to act as the trustee and who the beneficiaries are. You can change the terms of your testamentary trust at any time during you lifetime. Once you die, the terms of the trust cannot be changed. Assets in a testamentary trust are included in the probate estate, so it may take some time for your beneficiaries to gain access to the assets. Also, since probate hearings are public, all the property that will be included in the testamentary trust will be a matter of public record. However, the benefit of a testamentary trust is that you will be able to use those assets without restriction for the rest of your life.
A pour-over will is a hybrid of a living and testamentary trust. To create a pour-over, you start by creating a living trust. This will require you to transfer some assets to the trust and identify a trustee and beneficiaries. Next, you draft a valid will making any specific gifts to people you want. Then, state in the will that any property that is left over from the specific gifts are to be transferred to the trust and distributed subject to its terms. This way you have one trust for all of your property but you do not have to transfer it all at once while you are still alive. Please note that the property that is transferred into the trust through your will still has to go through probate.