What is a Revocable Living Trust?
A revocable living trust is also commonly referred to as a revocable inter trust, a trust or, simply, a living trust. A living trust may be amended or revoked by the person creating it (commonly known as a “trustor,” “grantor,” or “settlor”) at any time during the trustor’s lifetime, as long as the trustor is competent. A trust is a written agreement between the individual creating the trust and the person or institution named to manage the assets held in the trust (the “trustee.”) In many cases, it is appropriate for you to be the initial trustee of your living trust, until management assistance is anticipated or required, at which point your trust should designate an individual or bank or trust company to act in your place. The terms of the trust become irrevocable upon the trustor’s death. Because the trust contains provisions which provide for the distribution of your assets on and after your death, the trust acts as a substitute for your will, and eliminates the need for the proba
A revocable living trust (also known as a “living trust” or “inter vivos trust”) allows you to to put your assets in a trust created during your lifetime, which can be revoked or amended whenever you wish to do so. The choice of a living trust should be made after consideration of a number of factors. You can also create an “irrevocable” living trust, but that is permanent and unchangeable and is almost exclusively done to produce certain tax results. In a revocable living trust, your or someone in whom you have confidence manages the property for the benefit of you or your family. Most people name themselves trustees, and find there is no difference between managing the trust and managing their own property. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries. Like a will, a living trust can provide for the distribution of property upon your death
[back to top] A revocable living trust is an intangible legal entity that comes into existence upon the execution of a Declaration of Trust. The Declaration of Trust “declares” the provisions of the living trust as well as procedures and beneficiaries. Once the Declaration of Trust is executed, the trust exists. The person in charge of and authorized to act on behalf of the living trust is referred to as the trustee. Trustees also manage the trust on behalf of the beneficiaries. You, as grantor, should be the trustee of the trust and during your lifetime, the beneficiary of all trust assets. Only after your death do the trust beneficiaries named in the Declaration of Trust have rights to the trust property. The grantor can revoke the trust at anytime during his or her lifetime. Upon death, the trust becomes irrevocable.
This is an agreement with three parties: the Trustmakers, the Trust Managers, and the Trust Beneficiaries. For example, a husband and wife may name themselves all three parties to create their trust, manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets as beneficiaries. Further “back-up” managers can step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs upon the trustmaker’s death. With proper planning, the couple also can avoid or minimize estate taxes on their estate. It is also possible for beneficiaries to receive catastrophic creditor protection after the Trustmakers have died. The Revocable Living Trust may allow them to accomplish all this outside of any court proceeding.
