What are Revocable Living Trusts?
Posted: November 3, 2017
Revocable living trusts can be more cost effective than the costs of probate. The initial cost to create and fund a trust is typically less than the costs required for a probate proceeding.
Because the trust is revocable (and may be amended) by the Grantor, the Grantor does not lose any control over the trust assets during his or her lifetime. He or she may withdraw trust assets and spend trust assets just like assets a person owns titled in their individual name.
Because the trust does not limit the Grantor’s use and enjoyment of the trust assets, it does not provide creditor protection during the Grantor’s lifetime. (This is a distinction between “revocable trusts” and certain “irrevocable trusts.”)
The Grantor may be the Trustee of their revocable living trust during their lifetime, and the trust agreement may name successor Trustees to act in the event of the Grantor’s death, resignation or inability to act as Trustee. (A “Trustee” is the person who has authority to manage trust assets.)
Upon the Grantor’s death, the Trustee must administer and distribute the trust assets as directed by the Trust Agreement. Typically, this involves paying bills and taxes, and then distributing the remaining trust assets to the named beneficiaries. (The Trustee may or may not be a beneficiary of the trust.)
The Trust Agreement can provide for outright distributions to beneficiaries when the Grantor dies, or can provide for a new irrevocable trust to be established for one or more beneficiaries (sometimes referred to as a “continuing trust”), which may continue for one or more generations.
A Trustee has a legal fiduciary duty to abide by the Trust Agreement. A beneficiary can bring a court action to enforce the terms of a trust if necessary.