What is a Revocable Trust?

Understanding Revocable Living Trusts: What They Are and Why You Might Need One

What is a Trust?

1. Grantor: The person(s) who creates the trust.
2. Trustee: The individual or entity responsible for managing the trust according to its terms. Often, the grantor serves as the initial trustee.
3. Beneficiaries: The people or organizations that will receive the assets from the trust.

What is a Revocable Living Trust?

1. Flexibility: You can change the terms, add or remove assets, and even dissolve the trust entirely while you are alive.
2. Control: You retain control over the assets in the trust, allowing you to manage them as if they were still in your own name.
3. Privacy: Unlike wills, which go through probate and become public record, trusts generally remain private.
4. Avoiding Probate: Assets in a revocable living trust typically do not go through probate, which can save time and legal fees.

Why Create a Revocable Living Trust?

1. Simplified Asset Management:
   • Continuity in Incapacity: If you become incapacitated, the successor trustee can manage the trust assets without court intervention, ensuring continuity in financial management.
   • Avoiding Probate: Upon your death, the assets in the trust can be distributed directly to beneficiaries without the need for probate, speeding up the process and reducing costs.
2. Flexibility and Control:
   • You maintain control over the trust assets during your lifetime, making it easy to manage, amend, or revoke the trust if your circumstances change.
   • For example, in the event of a divorce, you can revoke a joint trust and redistribute the assets as needed.
3. Estate Planning:
   • Tax Benefits: While a revocable living trust itself does not offer tax advantages, it can be part of a broader estate planning strategy that includes other tools to minimize estate taxes.
   • Distribution Plans: You can specify detailed instructions for how and when your assets should be distributed to beneficiaries, providing clarity and reducing the potential for disputes.
4. Protection and Privacy:
   • Trusts are private documents and do not become part of the public record, unlike wills that go through probate. This ensures that the details of your estate remain confidential.

How a Revocable Living Trust Works

1. Creating the Trust:
   • Work with an attorney to draft the trust document, outlining the terms, beneficiaries, and trustees.
   • Transfer ownership of your assets into the trust. This might include real estate, bank accounts, investments, and personal property.
2. Managing the Trust:
   • As the grantor and initial trustee, you manage the assets within the trust, using them as needed and making changes to the trust terms if necessary.
3. Successor Trustee:
   • Designate a successor trustee who will take over management of the trust upon your death or incapacity. This ensures that your assets are managed and distributed according to your wishes without court intervention.
4. Amending or Revoking the Trust:
   • At any time during your lifetime, you can amend the terms of the trust or revoke it entirely. This flexibility allows you to adjust your estate plan as your circumstances or wishes change.
5. Distribution of Assets:
   • Upon your death, the successor trustee distributes the trust assets to the beneficiaries according to the terms of the trust, avoiding probate and ensuring a smooth transition.

Conclusion