Many people have a “revocable living trust” without understanding exactly what it is. If you learn a few basics about trusts, you can understand what they are and how they work.

Trusts began long ago in England, during the Middle Ages. In those days, knights, barons, dukes and others owned property. If a property owner was convicted of a felony, the King could take away his property. A greedy king could get more and more property by declaring that property owners had committed crimes.

Property owners found a legal way to protect their property from the king. The law allowed separation of the “legal” title of property from the “equitable” ownership of the property. The person who had the “legal” title owned the property, but the person with the “equitable” ownership could use and enjoy the property. One sure way to protect the property was to give the legal title to the church, which was the Catholic Church. The king could not take property away from the church. Many property owners gave their legal title to the church, but kept the equitable ownership for their families. This protected the property from the king.

This separation of the legal title of property from the equitable ownership (or use and enjoyment) was called a “Trust” because the property owner was trusting someone else to own the legal title to the property. The use of Trusts continued into modern England, and came to America with the colonists. Trusts have been recognized by English and American law for hundreds of years.

A trust is created by a “trust agreement.” The trust agreement is a contract between two people. It is a legal document. Many trust agreements are 20 to 40 pages long.

The two people who make the trust agreement are the “Grantor” and the “Trustee.” In legal language, to “grant” means to give. The person who is creating the trust is called a “Grantor” because he is granting or giving his property to the Trustee. The Grantor is sometimes called the “Settlor,” because he is settling his affairs in regard to the property he is giving to the Trustee. Sometimes the Grantor is called the “Trustor,” because he is trusting the Trustee with his property.

The person receiving the property is called the “Trustee” because he is being trusted to own the legal title. The Trustee is responsible for taking care of the property, but he cannot take the property for himself or use it for himself. The Trustee’s job is to use the property to take care of the “Beneficiary.” The “Beneficiary” is the person who benefits from the trust, who can use and enjoy the trust property. The Trust Agreement says who the Beneficiary is.

The property in the trust is called the trust “property” or “assets” or “corpus” or “res.” (I have hardly ever seen the word “res” used since I learned it in law school.)

A Revocable Living Trust is one form of trust. “Revocable” means you can cancel the trust at any time and take your property back to yourself. “Living” means you create the trust while you are still living. (A “Testamentary” trust is one created by your will after you die.)

A Revocable Living Trust is usually set up with the same person as Grantor, Trustee and Beneficiary. For example, my own Revocable Living Trust says that I, Sanford Okura as an individual, am giving my property to Sanford Okura as Trustee, to be held for the benefit of Sanford Okura as an individual. As Trustee, I can control the property, manage it, sell it, buy more property, etc. As Beneficiary, I can enjoy the property and use it. If the trust owns any money, I as Trustee can give that money to me as Beneficiary. Since I am both Trustee and Beneficiary, I have complete control and use of my assets, yet I don’t technically own the property. My trust does. Therefore if I die, nothing in the trust has to go to court for probate. My Trust Agreement says that if I die, my wife will take over as Successor Trustee. Without having to go to court, she can take over control of my trust, and use the property for herself and our children. That is how a Revocable Living Trust avoids probate.

This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.