A trust based estate plan uses a revocable living trust to contain all of the instructions that the client wants to apply to their property at their death. Unlike a will, a living trust springs to life upon signing. It is an independent legal entity with rights and responsibilities of its own. The operations of the trust are carried out by Trustees, rather than Personal Representatives. More about Trustees later. Unlike a will, property is transferred from the client to the living trust soon after signing. The trust becomes the legal owner of the property for state and some federal law purposes. When a death occurs, the trust is already the owner and does not need to go to the probate court for supervision. Typically, the client is also the trustee. Upon the death of the client-Grantor the terms of the trust automatically transfer power and responsibility to the successor Trustee who is the person or persons the Grantor has chosen to act as the Trustee after the Grantor’s death.
If you look at the operative provisions of a trust, you will see that they are very similar to those included in a will. This is particularly true for the portions that deal with the payment of expenses, dispositions of specific bequests, disposition of the property, and the powers and responsibilities of the successor trustee or trustees.
Because a living trust springs to life upon signing, it will contain instructions that enable a successor trustee to make decisions during the life of a disabled or incapacitated Grantor. The trust itself is a substituted decision making document of its own. Financial institutions are more likely to understand the concept of a successor trustee than the concept of an Agent under a financial power of attorney.
Of course, any competent estate planning attorney will also prepare a health care power of attorney and a financial property power of attorney. However, the power of attorney used in the trust-based plan is frequently limited in scope to protect the Grantor. This is generally considered to be a considerable benefit of a trust-based estate plan, because if the financial institution will not accept a power of attorney, there is always the successor trustee in the living trust to fall back on.