What is a Revocable Living Trust?
Do I need a Revocable Living Trust?
A Revocable Living Trust can be an important part of an estate plan. In order to really understand whether a Revocable Living Trust might make sense for you, you should first get generally familiar with probate.
A Revocable Living Trust can:
- Reduce or eliminate the cost and burden of probate
- Help to manage your assets in the event that you are unable to do so
- Provide for how your assets are to be distributed in the event of your death
- Protect your beneficiaries from creditors
Trust basics
A trust can be revocable or irrevocable. A revocable trust can be amended at any time or, as the time implies, revoked entirely. An irrevocable trust cannot be amended or revoked once it is executed. Both types of trusts have important, but very different, advantages and disadvantages.
Also, a trust can be something that exists while you are alive, or it can be something that only comes into existence when you die. We call a trust that exists while you are alive a “living trust.” That is not because the trust is “alive,” it is because you are alive while the trust exists. Some people prefer the Latin term inter vivos (literally, “between the living”) to describe such trusts. So there is no difference between a “living trust” and an “inter vivos trust”. They are the same thing, some people just prefer the fancier Latin description.
Unlike a living trust which exists during your lifetime, a testamentary trust is a trust that comes into existence at your death. Typically this is done through your Last Will and Testament, which states that at your death the trust comes into existence. Just remember that when we speak of “testament” or “testamentary” in the estate planning context, we are talking about things that happen at your death.
All trusts have three players: the Grantor (sometimes called a Settlor), the Trustee, and the Beneficiary. The Grantor is the person (or people) that set up the trust and contribute property to it. The Trustee is the person (or people) that manage the property in the trust and control distributions from the trust. The Beneficiary is the person (or people) that are entitled to receive property from the trust. Typically, for a revocable living trust, one person has all three roles. If you set up a revocable living trust, typically you would be the Grantor, Trustee and Beneficiary while you are alive and able to manage your own affairs. For married couples, we often recommend a family trust. It’s the same thing – a revocable living trust – where the spouses are the Grantors, co-Trustees, and Beneficiaries.