Smakuakane by Scott A. Makuakane, Esq., CFP Counselor at Law, Est8Planning Counsel LLLC Honolulu, Hawaii  96813 State Coordinator of the national ElderCare Matters Alliance, Hawaii chapter A trust is the legal relationship that is created when a person transfers “stuff” to a trustee with the understanding that the trustee will manage it for the benefit of one or more beneficiaries.  We use the term “stuff” to mean any kind of property you can own.  It includes both real property—such as land and buildings—and personal property—such as bank accounts, stocks and bonds, and personal effects.  The person who transfers the stuff to the trustee is called a trustmaker.  This person is also known as a settlor, grantor, or trustor.  Usually, the trustmaker is also the trustee (or perhaps co-trustee) and the initial beneficiary of the trust.  It is not uncommon for husbands and wives to create two separate trusts and to be the co-trustees of both of their trusts during their joint lifetimes, and then, after the death of one spouse, to have the survivor serve either as sole trustee or co-trustee with one or more other individuals or a trust company.  A trust is controlled by a document called the trust agreement (sometimes called the trust instrument).  The trust agreement sets out the rules about how the trust will be run.  We often refer to a client’s set of estate planning documents as their “rule book,” and the trust agreement is the part of the rule book that controls the trust.  If the trust agreement says that the trustmaker can revoke it or change it, the trust is what we call a revocable trust.  If the trust agreement does not allow the trustmaker to change or revoke it, we have what is called an irrevocable trust.  Irrevocable trusts are used in many estate plans.  They allow trustmakers to make gifts but keep the recipients from having complete control over the gifted assets.  Irrevocable trusts play an important part in many estate plans.  They can help provide tax savings, creditor protection, and expert management of assets.  A living trust is one that you create and fund (transfer stuff into) during your lifetime.  It can be revocable or irrevocable, depending on how much control you want to maintain over the trust and its assets.  A revocable trust gives you complete control, whereas an irrevocable trust gives you limited or no control.  A testamentary trust is one that goes into effect and is funded following your death because it is governed by your last will and testament.  You remain in control of your trust assets as long as your trust is revocable.  The trustee is bound by the trust agreement.  You have final say over what the trust agreement says,and failure to abide by the trust agreement can make the trustee personally liable to the beneficiaries, including yourself.  This means that if the trustee messes up, that person may have to pay for the mess out of his or her own pocket.  Most often, the trustmaker of a revocable living trust is the initial trustee.  In that situation, the trustmaker does not have to worry about anyone questioning his or her management of the trust.  In fact, potential beneficiaries have a vested interest in not doing anything that might cause the trustmaker to revoke the trust or change the trust agreement in order to exclude a troublemaker.  This is a simple demonstration of the “golden rule” of estate planning:        The One who hath the Gold maketh the Rules  If your kids are good kids, they won’t stick their noses into what you do with your trust.  If they are bad kids, hopefully they are smart kids and will at least act like good kids as long as you’re alive because they won’t want to be disinherited.  If you do not have any children—or don’t have any that you like—don’t assume that revocable living trusts are not a good idea for you.  There are many good reasons for creating trusts, and some of them may apply to your situation.  One reason that many people create revocable living trusts is so that their stuff will not go through probate after they are gone, or through conservatorship if they become incapacitated.  Once assets are transferred to the trustee, the trustmaker no longer holds legal title to them—even if the trustmaker and the trustee are the same person.  Thus, if the trustmaker dies or becomes incapacitated, the trust continues, and the successor trustee (who is named in the trust agreement) takes over administering the trust.   Trusts are often the building blocks of effective estate plans.  They provide simplicity, flexibility, and predictability in dealing with your assets.  The also give you the peace of mind of knowing that you have arranged your affairs to ensure that your wishes will be carried out, and that future transitions (such as your incapacity or death) will be much easier on your loved ones.