Every living trust must have a trustee—that is, a person (or institution) who manages trust property under the terms of the trust. When you make a trust with Nolo’s Online Living Trust, you are the trustee. In the trust, you name someone else to be the successor trustee to take over after you have died.
You will be the original trustee of your living trust. As trustee, you will have complete control over the property that will be held in the trust.
As a day-to-day, practical matter, it makes little difference that your property is now held in trust. You won't have any special duties as trustee of your trust. You do not even need to file a separate income tax return for the living trust. If the property generates income, just report it on your personal income tax return, as if the trust did not exist.
You have the same freedom to sell, give away or mortgage trust property as you did before you put the property into the living trust. The only difference is that you must now sign documents in your capacity as trustee.
EXAMPLE: Celeste wants to sell a piece of land that is owned in her name as trustee of her living trust. She prepares a deed transferring ownership of the land to the new owner and signs the deed as "Celeste Tornetti, trustee of the Celeste Tornetti Revocable Living Trust dated February 4, 20XX."
You can't name someone else as trustee. In the unlikely event you don't want to be the original trustee of your living trust, you cannot use this trust. See an estate planning lawyer to draw up a more specialized living trust. Naming someone else as trustee has important tax consequences and means you give up control over trust property.
When you make your will, must choose a successor trustee -- someone to act as trustee after your death or incapacity. The successor trustee has no power or responsibility while you are alive and capable of managing your affairs.
If you become physically or mentally incapacitated and unable to manage your affairs, the successor trustee takes over management of the property in your living trust. But who should decide that it's time for the successor trustee to take over, if the issue ever comes up?
In the trust document, you'll name someone (and two alternates) to make this determination. These people do not have to be doctors; ideally, you will choose people who know you well and can give an unbiased opinion about whether or not you need help taking care of financial matters.
If there's ever a question of your ability to manage the trust, the successor trustee will ask your first choice for an opinion of your capacity. If that person isn't available, the successor trustee will go to your second, and if necessary, third choice. If one of them states, in writing, that because of your condition, the successor trustee needs to take over as trustee, then the successor can do so.
If the successor trustee takes over management of the trust, he or she has authority to use trust property for your health care, support and welfare. The law requires the trustee to act honestly and prudently in managing the property. And because you are no longer the trustee, the new trustee must file an income tax return for the trust. At your death, any remaining trust property is distributed to your beneficiaries.
The successor trustee has no power over property not in your living trust and no authority to make medical decisions for you. For this reason, it's also wise to create documents called durable powers of attorney, giving the successor trustee authority to manage property not held in trust and to make health care decisions.
After your death, the successor trustee takes over as trustee. His or her primary responsibility is to distribute trust property to the beneficiaries named in your Declaration of Trust. That is usually a straightforward process. An outline of the steps the successor trustee needs to take to transfer certain common kinds of property is in After a Grantor Dies.
The successor trustee may have long-term duties if the trust document creates a child's subtrust for trust property inherited by a young beneficiary. You can read more about this in Property Management for Young Beneficiaries.