How a Trust really works … a simple example

How a trust really works. A Trust operates simply, distributes assets without probate, and the ability to distribute assets over time is broad and flexible.

Let’s discover a simple example of how a trust really works.

Suppose Ward and June sign (“settle”) a Living Trust.

They title their major assets into the Trust. Their lives proceed as usual, and they have continual access to the assets in their Trust.

If Disability Arises.

Suppose further that later in life, Ward begins suffering from dementia. The Trust remains there for them. Ward and June are Co-Trustees of their Trust. So, June can still access the assets of the Trust. They can use those assets for regular life expenses. AND they can use those assets for any special care that Ward may require. 

Death of the First Settlor.

Now, Ward passes away, and June becomes a surviving spouse. In the Trust, Ward signed a Personal Property Statement. Through this statement, Ward leaves some of his personal property and sentimental value items. June remains a Trustee of the Trust. She can simply and easily hand out these items to herself, to children, nieces, nephews and friends. Without any court or attorney involvement, supervision or probate procedure, June can distribute those things. She does so per Ward’s wishes (as contractually mandated in the Trust).

During the remainder of June’s life, the Trust assets are still available for her everyday life,. And yes, they are available also for any special care that she may require. (Most couples do elect, however, that the Trust terms are “locked-in” and no longer subject to change or revocation once the first settlor has passed away.)

Years later, June (the surviving spouse or second Settlor) passes away.

Again, when June passes away, the successor Trustee distributes June’s personal property according to her personal property statement. (The Successor Trustee is someone Ward and June named to administer the Trust, according to its provisions, once they are no longer able.)

At this point, the ultimate distribution terms of the Trust become active. The Successor Trustee can distribute the major assets from the Trust Again, he or she does so as mandated by the terms of the Trust — to those to whom Ward and June chose to leave their legacy. Again, without probate and without court supervision, the Successor Trustee can distribute Ward and June’s home and major assets to their loved ones and friends. That Trustee delivers personal property, writes checks, assigns funds and deeds real estate. It is a fairly simple matter.

Not to complicate the explanation, but if Ward and June included such directions in their Trust, assets can either be distributed right away. Notably they could also provide that certain people receive their distribution at age 25 or 30 . Or maybe it is administered to assist with post-high school training or education. 

This ability to administer assets for a time, pursuant to a schedule or triggering events is another way that a Trust differs from a Will.

A Trust operates simply, assets are distributed without probate, and the ability to administer and distribute assets over time without court involvement is broad and flexible.