Three parties are required to create a living trust: The settlor, or trustor, is the party who creates the trust, sets its terms and deposits assets into it. The trustee is the person that administers the trust in accordance with the terms you, as the settlor, have set. You may appoint yourself as the trustee. Beneficiaries are the persons or organizations you appoint to receive the trust assets. A trust may include other parties as well; for example, you may name either a successor trustee or a trust protector whose sole function is to hire and fire trustees.
A living trust is created when you draft and sign a Declaration of Trust. The Declaration of Trust identifies the parties to the trust, specifies whether it is revocable or irrevocable, and tells the trustee how to distribute trust assets. The Declaration of Trust may give the trustee specific instructions on how to distribute the trust's assets or allow the trustee broad discretionary authority. For example, the trustee may be permitted to invest the trust assets and distribute only capital gains to the beneficiaries. If the trust is revocable, as most are, you may modify or terminate it at any time. Pennsylvania, unlike many other states, allows you to modify or terminate a living trust, even an irrevocable one, if you can secure the unanimous consent of the beneficiaries.
A living trust is useless until it is funded with assets. You may list trust assets in an appendix to the Declaration of Trust. If the trust is irrevocable, titled assets such as bank accounts and real estate should be retitled in the name of the trustee. Some assets are difficult to hold in a trust -- for example, insurance companies may be reluctant to insure an automobile owned by a trust.
Pennsylvania requires the trustee of an irrevocable living trust to send a notice to any beneficiary or potential beneficiary over the age of 25. The primary reason for this requirement is that, unlike in many states, a Pennsylvania court will not enforce a trust except upon the request of the trustee or a beneficiary. A beneficiary must know that he is a beneficiary to seek judicial assistance in enforcing the trust. The notice must inform the beneficiary of the existence of the trust, identify the settlor, provide the trustee's contact details and inform the beneficiary that he has the right to a copy of the trust document and an annual report detailing the trustee's disposition of trust assets.
The assets of a living trust are not subject to the Pennsylvania probate process. The trustee may immediately distribute trust assets to beneficiaries to the extent the Declaration of Authority expressed in the trust document grants him the authority to do so. Assets may be distributed without seeking approval from the estate executor or probate court.