A Revocable Living Trust, in general, describes any trust that is created by a person for that person’s own benefit while he or she is alive, and then directs where the trust funds should be distributed after the person’s death. Effectively, a Revocable Living Trust is part Financial Power of Attorney and part Will, wrapped up into one document. Revocable Living Trusts can be customized in an infinite number of ways and it can be created for an individual or a couple.
The primary reason that most people decide to create a Revocable Living Trust, rather than just a Will, is to avoid probate. There are many reasons that people may wish to avoid probate. In some jurisdictions, probate can be quite costly and time consuming. For some people, they just wish to keep their affairs private – and probate is a public process.
There can be many other benefits to having a Revocable Living Trust. They can provide for a great deal of flexibility and control after you pass away. Even more than a Will. It can also provide a structure to manage your financial assets that are located in one country when you live in another country.
A Revocable Living Trust should not be confused with an irrevocable trust. The key feature of a Revocable Living Trust is that it can be changed, amended, or revoked by the Grantor. (The person creating a trust is known as the Grantor.) With an irrevocable trust, it generally cannot be changed, amended, or revoked by the Grantor. A Revocable Living Trust is typically used as a Will substitute, whereas irrevocable trusts are typically used for tax planning, Medicaid planning, or as a way to give money to a third party while maintaining control.
It should be noted that a Revocable Living Trust becomes irrevocable when the Grantor passes away. It is also important to note that a person’s Revocable Living Trust only controls the assets that are owned by the trust. Accordingly, if a person’s assets are outside the trust at the time of his or her death, then probate is still required to deal with those assets.
If you would like to read more about revocable living trusts, we have also written this helpful post:
A Revocable Living Trust is a common estate planning document that is typically used as a substitute for having a Will.