What You Need to Know About Family Trust vs Living Trust
Individuals may create trusts for family members before death to provide financial support. Here’s everything you need to know about family trust vs living trust.
A family trust is a type of living trust. A family member creates a living trust to provide assets to other family members while the trust’s creator is alive. Family trusts and living trusts are revocable trusts.
Family Trust
A family trust is a legal document granting one family member financial responsibility for other family members. A grantor creates the family trust and provides the financial assets. An additional trustee manages the trust for the family. Beneficiaries are the family members receiving the trust.
A family trust may include clauses consisting of the terms for the trust. Clauses can state when the family members will receive the finances, or the condition for the family members must meet to receive finances. The trust will determine which assets each family member will receive.
Living Trust
A living trust is a legal document created and enacted while the trust’s owner is alive. A living trust grants the trust owner responsibility for another individual’s finances. A living trust owner is a trustee. The trustee must determine who the successor trustee will be after their death. The person receiving the assets included in the trust is the beneficiary.
Living trusts cause the beneficiary to receive the trustee’s finances if the trustee dies. Living trusts allow the parties to avoid the court because all terms of the trust are determined while the trustee is alive. The beneficiary will continuously receive the trustee’s financial help depending on the clauses after the trustee’s death.
The Difference Between Family Trusts and Living Trusts
A family trust is a type of living trust. The grantor creates a family trust under their terms while they are still alive. A probate court does not manage a living trust and family trust. Living trusts can be for any beneficiary, including friends and non-family members. Family trusts are living trusts strictly for families. Family trusts and living trusts differ from wills because will only allow the beneficiaries to receive the trustee’s assets after the trustee’s death.
Revocable and Irrevocable Trust
A revocable trust is a modifiable trust. Living trusts and family trusts are revocable trusts because the trustee is living and may choose to alter the trust at any time. A revocable trust allows the trustee to change the terms of the trust or remove beneficiaries at any time. Irrevocable trusts are non-modifiable after the law grants them to the beneficiary.
FAQs About Family Trust vs Living Trust
Can a family trust become irrevocable?
Family trusts are revocable because the trust is created for the beneficiaries while the trustee is alive. The trustee may restrict modification in the original trust, making it irrevocable.
When does a living trust end?
A trustee will determine the length of the trust for the beneficiary in the original trust. The trustee may set guidelines stating certain conditions the beneficiary must meet to receive the trust. If the beneficiary does not meet the conditions or the beneficiary dies, the trust will end.
What if the trustee does not name a successor trustee?
A Pennsylvania court will work with the beneficiaries to determine the best-fit individual to become the successor trustee. Even if the original trustee did not name a successor, the trust must have a new trustee.
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