A Revocable Living Trust, also called a Revocable Trust, Living Trust or Inter Vivos Trust, is simply a type of trust that can be changed at any time. In other words, if you have second thoughts about a provision in the trust or change your mind about who should be a trust beneficiary or trustee, then you can modify the terms of the trust through what is called a trust amendment. Or, if you decide that you do not like anything about the trust at all, then you can either revoke the entire agreement or change the entire contents through a trust amendment and restatement.
Avoiding probate court proceedings after your death can save your family time, money, and headaches. Revocable living trusts are the only probate-avoidance technique that allows you to avoid probate for virtually any property you own: real estate, jewelry, heirlooms, bank accounts, and much more.
Revocable living trusts function like wills – you use them to leave your property, and if you change your mind at any time while you’re alive, you can change the terms of the trust or revoke it altogether. The advantage comes at your death. Property in the trust is controlled by the person you named to take over as successor trustee, and that person has the power to distribute the property to inheritors without any probate court involvement. That saves everyone a lot of work and gets property to the people you chose to inherit it much more quickly.
Why should you use a Revocable Living Trust as part of your estate plan?
For three important reasons:
- To plan for mental disability – Assets held in the name of a Revocable Living Trust at the time a person becomes mentally incapacitated can be managed by their Disability Trustee instead of by a court-supervised guardian or conservator.
- To avoid probate – Assets held in the name of a Revocable Living Trust at the time of a person’s death will pass directly to the beneficiaries named in the trust agreement and outside of the probate process.
- To protect the privacy of your property and beneficiaries after you die – By avoiding probate with a Revocable Living Trust, your trust agreement will remain a private document and avoid becoming a public record for all the world to see and read. This will keep the details about your assets and who you have decided to leave your estate to a private family matter. Contrast this with a Last Will and Testament that has been admitted to probate – it becomes a public court record that anyone can see and read.
Since Revocable Living Trusts are so flexible, why aren’t all trusts revocable? Because the down side to a revocable trust is that assets funded into the trust will still be considered your own personal assets for creditor and estate tax purposes. This means that a revocable trust offers no creditor protection if you are sued, all of the trust assets will be considered yours for Medicaid planning purposes, and all assets held in the name of the trust at the time of your death will be subject to both state and federal estate taxes and state inheritance taxes. The answer to these situations might be a irrevocable trust.