What is a Revocable Living Trust? Understanding This Powerful Estate Planning Tool
You may be wondering, what is a revocable living trust? Well, a revocable living trust is a versatile estate-planning tool that has gained popularity in recent years because it offers immense advantages to individuals who wish to manage their assets during their lifetime and effectively distribute them to beneficiaries upon one’s death. At Antanavage Farbiarz, many of our estate planning clients come to us looking for an effective, private, and flexible method of asset control and probate avoidance. In this comprehensive guide, we will cover just what a revocable living trust is, how one works, and why a revocable living trust might be the right choice for your estate plan.
What is a Revocable Living Trust?
A living revocable trust is a legal entity created during the lifetime of an individual that allows him or her to transfer the legal title of property to a trust while retaining legal control of those properties. What does “revocable” mean? It means at any time during one’s life, the creator of the trust, the grantor or settlor can change, modify, or if he or she desires, revoke the trust. This flexibility is perhaps the most significant characteristic that differentiates this variety of trusts from others.
The primary purpose of this trust, therefore, is to protect and manage the grantor’s assets during his lifetime and then ultimately distribute the remaining assets to other beneficiaries upon his death without going into the usually cumbersome and expensive process of probate.
How Does a Revocable Living Trust Work?
To understand what a living revocable trust is and how it works, one has to know what the different parts of a revocable living trust are. The key roles are described below.
Roles in a Revocable Living Trust
- Grantor: This would refer to anyone who creates a trust and then transfers ownership of their assets into that trust.
- Trustee: This refers to anyone or anything that manages or controls the assets held by the trust. Most often, the grantor acts as or names themselves as the original trustee.
- Successor Trustee: The person or entity that would take over the administration of the trust if the grantor became incapacitated or passed away.
- Beneficiaries: Those people or organizations that are intended to receive the principal of the trust either during or after the life of the grantor.
Creating and Funding the Trust
When creating a revocable living trust, the assistance of a notary is availed to provide the document on how the working of the trust and distribution of assets should be affected. Once the creation of the trust is in order, the grantor is required to transfer ownership of assets into the trust through a process called “funding” the trust.
5 Benefits of a Revocable Living Trust
Understanding what a revocable living trust entails encompasses the recognition of a host of advantages:
- Probate avoidance: for the assets that are held within a revocable living trust helps the beneficiaries save time and money by avoiding probate altogether.
- Privacy: Unlike wills, which at probate become public records, a revocable living trust stays private and keeps your distribution of assets private.
- Flexibility: The nature of this trust is such that it is revocable, based on either changes in the grantor’s circumstances or wishes.
- Incapability Planning: A revocable living trust allows for the management of your assets in the event of your incapacity and inability to act on your own behalf, without court intervention.
- Seamless Asset Management: The trust functions smoothly at the time of the grantor’s death, allowing for the continued management and distribution of your assets.
3 Limitations of Revocable Living Trusts
While understanding what a revocable living trust is involves recognizing its benefits, it’s equally important to be aware of some limitations:
- No tax benefits: unlike in irrevocable trusts; neither is there protection against creditors regarding the assets.
- Higher Cost: As compared to creating a simple will, establishing and funding a revocable living trust costs more, and is somewhat time-consuming.
- Management During Life: In managing the trust, one needs to be articulate on the proper titling of newly acquired assets in the name of the trust.
Who Should Consider a Revocable Living Trust?
It may be helpful for the majority of individuals, but especially beneficial to those who: own property in more than one state; own an estate that is complex with various different types of property; regard the privacy involved in estate planning; would like their heirs to avoid probate; would like the capability to change and update their assets over the course of their lifetime.
How a Revocable Living Trust is Created
A revocable living trust can be created by following several steps:
- Consult an experienced estate planning attorney who can help determine if a revocable living trust makes sense for you. In writing, create the trust document, declaring your wishes and instructions.
- Sign the trust document in front of a notary public. Retitle assets held in your name in the name of the living trust.
- Periodically review and update your trust to ensure it continues to reflect your wishes and includes all relevant assets.
Understanding What is a Revocable Living Trust
A revocable living trust is an incredibly flexible and powerful estate-planning tool with enormous advantages for many individuals. Since it lets you be in control of your assets during your lifetime and provides the methods to efficiently transfer your assets at death, it may act as the centerpiece for a general estate plan.
Antanavage Farbiarz not only helps our clients understand what a revocable living trust is, but we also provide information on how it applies to their situation. In regard to that, our estate planning lawyers can help you draft and fund a revocable living trust to effectively protect your assets and efficiently carry out your wishes in private.
If you have any other questions about what a revocable living trust is capable of doing for your estate plan, please do not hesitate to contact Antanavage Farbiarz today! You can give us a call at (610) 562-2000 or click here to schedule a consultation with one of our experienced attorneys. Let us help you protect your legacy and give you and your loved ones the peace of mind you deserve.
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