Revocable Trust (also referred to as a Revocable Living Trust)

A trust is a written agreement between the person creating the trust, known as the grantor or the settlor, and the person or institution responsible for managing the trust property, known as the trustee. A trust is managed for the benefit of one or more beneficiaries. A trust may be revocable or irrevocable and may be created for a variety of purposes. If a trust is created during life, it is a living trust, and if created in a will, it is a testamentary trust. The most commonly used trust is a revocable living trust.

The grantor can revoke or change the provisions of a revocable trust, and can transfer assets into and out of the trust at any time. The grantor usually serves as initial trustee and the trust document designates one or more successor trustees to serve if the grantor becomes incapacitated or when the grantor dies. Ordinarily, the grantor is the sole or primary beneficiary during life. Due to the control over the trust assets and flexibility to amend and revoke that a grantor retains, a revocable trust does not protect the trust assets from creditors or from being considered available to pay for a nursing home under the Medicaid rules.

The revocable trust document provides instructions for how, when and to whom the trust assets will be distributed after the grantor’s death. This can include provisions for a surviving spouse, children, grandchildren, other relatives or friends and charitable beneficiaries. Federal and state estate and generation-skipping transfer tax provisions may also be included to minimize the impact of these taxes at the grantor’s death.

Many people use revocable trusts to avoid the probate process. If a grantor transfers assets to a revocable trust during life, those assets will be administered in accordance with the terms of the trust at the grantor’s death and will not be subject to probate. Unlike a will, a trust does not need to be filed with the probate court at the grantor’s death and will not become a public document. In addition, assets held in a revocable trust are immediately available at the grantor’s death for payment of funeral and other expenses, and in many instances may be distributed to the beneficiaries sooner than probate assets. A revocable trust becomes irrevocable at the death of the grantor.