What is a Revocable Trust?
What is a Revocable Trust?
A Revocable Trust, or "living trust" is a trust created during a person’s lifetime, hence the terms revocable and living. A Revocable Trust can manage assets if a person becomes ill, disabled. A Revocable Trust may be revoked before a person’s death. A Revocable Trust does not help avoid estate taxes because the power to revoke or amend the trust causes assets within the trust to continue to be includable in your estate. However, a Revocable Trust can maximize the marital deduction and help avoid probate, which may not always be necessary.
A Revocable Trust:
- Exists and is effective during your lifetime.
- Has a trustee who manages the property transferred into trust.
While a person(s) is living (“Settlor”), the trustee (who may be the Settlor(s)) manages the property as directed by the trust to the benefit of the Settlor. Upon Settlor’s death, the trustee is directed to either distribute the trust property to identified beneficiaries, or to continue to hold it and manage the property in trust(s) for the benefit of the beneficiaries.
Similar to will, a living trust can provide for distributing property upon your death, but unlike a will, it can also (1) provide a vehicle for managing property during your lifetime, and (2) authorize and direct the trustee to manage trust property for Settlor’s benefit if Settlor(s) become incapacitated. A Revocable trust can avoid the appointment of a guardian for that purpose.