A revocable trust is a legal document that allows a person to retain control over their assets while specifying who will receive them upon their passing.
One of the most frequently chosen kinds of trust is a revocable trust. This particular trust has many advantages, such as providing the grantor with control and flexibility over their possessions.
Trusts are very popular in estate planning as they can assist in helping people reach their desired objectives.
With so many options available, it can be challenging to select the trust that fits best with an individual’s needs. A revocable trust is one of the most preferred options since it grants flexibility and authority over one’s possessions.
What Is a Trust?
A trust is an arrangement wherein a person or company (the trustor) transfers assets to another individual or entity (the trustee) who holds and manages them for the benefit of a third party (the beneficiary).
When it comes to estate organization, a trust is a legally binding instrument used to organize and allocate one’s resources after their demise. It is comparable to a last will and testament, with one crucial difference. Assets held in a trust can bypass the probate process, preserving time and money for the bereaved (ie. California), where probate can be time-consuming and costly.
Numerous kinds of trusts exist, but they all fall under either revocable or irrevocable trusts. Both of these trust types have their advantages, but revocable trusts are usually the more popular and adaptable selection.
Can You Alter a Revocable Trust?
The person who created a revocable trust can alter or revoke it as it is a legal document. A revocable trust is also known as a revocable living trust or RLT.
The term “revocable” refers to the fact that you can alter or modify the trust at any time during your lifetime. This could include adding or removing beneficiaries, transferring assets in and out of the trust, and changing amounts allocated to beneficiaries.
You can also choose to terminate the RLT if it no longer meets your estate planning needs. Since you create the RLT during your lifetime, you can take up the role of a trustee while you are alive. This gives you more control over the assets in the trust, particularly if you intend to keep using them. In this case, you will need to designate a successor trustee who will handle the trust after you die or if you become incapacitated. An RLT offers numerous advantages to both its creator and its beneficiaries.
Comparing Revocable and Irrevocable Trusts
Revocable trusts can be adjusted easily and the creator can be the trustee themselves, whereas, with irrevocable trusts, modifications are more difficult to make and require approval from beneficiaries or the court.
Irrevocable trusts offer certain protections that revocable trusts don’t. These include tax benefits for bigger estates and defense from certain creditors. To understand the distinction between revocable and irrevocable trusts in more detail, take a look at our in-depth analysis.
Revocable Trusts FAQs
Here are some other frequently asked questions about revocable trusts.
Is it possible to alter the provisions of a revocable trust?
Undoubtedly, the most advantageous aspect of a revocable trust is the ability to be altered. As the grantor, you are free to modify, rewrite (termed “restating”), and nullify the revocable trust whenever you wish.
What is the expense of establishing a revocable trust?
The expense of setting up a revocable trust can differ depending on a couple of factors. Whether you make the trust yourself or get assistance from an estate planning lawyer. If you choose to use a professional, there will be a cost for their services. There are also numerous online resources accessible to develop your trust documents.
Once the creator of a revocable trust passes away, what happens to the trust?
Upon the death of the individual who established the trust, the trust automatically converts from a revocable trust to an irrevocable trust. At this point, the trustee (or the successor trustee, if the grantor was the trustee in their lifetime) must take over the responsibility of managing the trust. This includes paying any taxes or debts, dispersing assets to the beneficiaries, and concluding the trust in accordance with the trust’s stipulations.
Is there still a need for me to have a will if I have already established a trust?
Establishing a trust is essential, however, having a will is just as important. A will permits you to do things that a trust cannot, such as appointing a guardian to take care of your minor children. A lot of individuals create a pour-over will in conjunction with their trust.
If you possess belongings and don’t transfer them into your trust before your death, a pour-over will allow you assets to be moved into your will after you have passed away. However, a pour-over will must still go through the probate process before transferring the property to the trust. For that reason, it is usually wise to quickly transfer any assets you acquire to your trust.
Should I consider setting up a trust that can be reversed?
It is up to you to determine whether a revocable trust will be beneficial for your estate planning aims. If you are uncertain, you can seek help from an estate planning attorney. They can provide you with advice, guidance and direction in this matter.
