A revocable living trust is a trust that is established and funded during a person's lifetime, and which they have the power to modify or revoke. An irrevocable trust, on the other hand, is one that is created during a person's life, but which they relinquish the power to alter. A testamentary trust is one that is created and funded at the time of death. Both active trusts and wills offer many of the same protections, but they cover different periods of the grantor's life. A revocable living trust covers a person's assets while they are alive, when they are incapacitated, and when they have passed away.
A living will only covers the person's assets after their death. This type of trust is a popular estate planning tool that can be used to determine who will receive your property when you die. Most living trusts are revocable because you can change them as your circumstances or wishes change. Revocable life trusts are active because they are created during a person's lifetime. Lawyers sometimes refer to this as “inter vivors”.
The assets of a revocable active trust are not protected from current or future creditors in the event of death (but the assets of an irrevocable living trust may be protected from creditors). As long as the trustee is alive, they are usually the trustee, and then the successor trustee takes office after their death. A living trust or a revocable living trust can help your estate and heirs avoid the complications and costs of probate. Contrary to popular belief, revocable living trusts offer very little asset protection if you retain a share in the property, for example, if you make yourself a trustee. This type of will ensures that any assets that are not already in your trust are automatically transferred to your living trust after your death. A revocable active trust is a legal document that gives someone else the authority to make decisions about someone else's money or assets that are in a trust.
This is different from an irrevocable active trust, where the assets are no longer owned by the person. While establishing a revocable active trust has many advantages, there are also some drawbacks. However, the assets of an active trust and revocable living trusts generally don't have to go through a probate process, so they remain private. People create a revocable living trust to give another person the power to make financial decisions on their behalf, in case they become unable to do so due to injury or illness. Compared to wills, revocable trusts offer greater privacy, as well as greater control and flexibility in the distribution of assets.
Some estate planning goals can be achieved with both living trusts and wills, while others will require you to use one or the other. An active trust can also be used to help control a guardian's spending habits for the benefit of their minor children. The grantor of a revocable active trust maintains control of the trust's assets and can “revoke or change the trust” at any time. However, a trust cannot designate guardianship for minor children, which is why wills and living trusts are often used together as part of an estate plan.
