To be legally valid, every living trust must have a trustee -- someone to manage the property held in trust. When you create a shared revocable living trust, both grantors are the trustees while you are alive. You'll name someone else to be the successor trustee, to take over after both of you have died.
Both grantors will be the original trustees of your living trust. That way, both of you have control over trust property, and taxation doesn't get complicated.
You can't name someone else as trustee. In the unlikely event you don't want to be the trustees or want only one of you to be trustee, you cannot use this trust. See an estate planning lawyer.
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 trustees 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 capacities as trustees.
EXAMPLE: Celeste and Robert want to sell a piece of land that is owned in the name of their living trust. They prepare a deed transferring ownership of the land from the trust to the new owner, and sign the deed as "Celeste Tornetti and Robert Tornetti, trustees of the Celeste Tornetti and Robert Tornetti Revocable Living Trust dated February 4, 20xx."
It's important to realize that once the property is held in trust, either trustee has authority over it. That means that either one can sell or give away any of the trust property -- including any property that was co-owned or was the separate property of the other grantor before it was transferred to the trust. In practice, however, both of you will probably have to consent to transfer real estate out of the living trust. Especially in community property states, buyers and title insurance companies usually insist on both owners' signatures on transfer documents.
If you don't want to give your spouse or partner legal authority over your separately owned property, it's best to make separate living trusts.
When one grantor dies or becomes incapacitated and unable to manage his or her affairs, the other becomes sole trustee.
But who should decide that it's time for an original trustee to step aside, 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 one trustee takes over management of trust property, he or she has no power over property not held in trust and no authority to make health care decisions for the incapacitated trustee. For this reason, it's also wise for each of you to create documents called durable powers of attorney, giving the other spouse or partner authority to manage property not owned in the name of the trust and to make health care decisions.
Resource. Nolo's Quicken WillMaker lets you make a living will and durable power of attorney that express your wishes and are valid under the laws of your state.
After one grantor's death, the survivor, as trustee, is responsible for distributing trust property of the deceased grantor that is not left to the surviving grantor. The survivor must follow the deceased grantor's wishes as they are set out in the trust document. The survivor has no legal power to modify the deceased grantor's intentions in any way.
The survivor may have long-term duties if the trust document creates a child's subtrust for trust property inherited by a young beneficiary. It falls to the surviving trustee to manage trust property left to a young beneficiary in this way, possibly for many years. (This is explained in Property Management for Young Beneficiaries.)