People create a revocable living trust to give someone else the power to make financial decisions on their behalf, in case they are unable to do so due to injury or illness. The grantor of a living revocable trust retains the power to freely modify and revoke the trust, and to reacquire its assets. It is distinguished from an irrevocable trust, which the grantor cannot modify or revoke. A revocable living trust is a popular estate planning tool that you can use to determine who will keep 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 you create them during your lifetime. Lawyers sometimes call it inter Vivos. A revocable trust is a legal document that allows the grantor (the person who creates the trust) to take your personal assets and transfer them to the trust property during your lifetime. You should also keep in mind that revocable trusts don't offer the same type of protection as irrevocable trusts against creditors.
The cost of an attorney preparing a revocable living trust is generally higher than the cost of preparing a last will and a will; creating a revocable living trust can take longer and longer than drafting a will because it requires a lot of work up front. It is important to consult with an attorney before signing a revocable living trust so that you can fully understand the advantages and disadvantages of using it. All of the estate tax planning that can be implemented through the use of a revocable living trust can also be carried out through the use of a will. Attacks based on lack of due execution are very difficult, although the level of competence required to execute a revocable trust is higher; for example, in this situation, a successor trustee is also appointed to, after the death of the grantor, assume the charge of managing the revocable trust and distributing the assets. For more information on irrevocable trusts, which can be used for purposes such as avoiding estate taxes or caring for a person with special needs, see Irrevocable Living Trusts. In addition, assets transferred to the Revocable Life Trust are not protected for the purposes of meeting Medicaid requirements or planning for long-term care.
You can also create an irrevocable active trust, but this type of trust cannot be revoked or changed, and this type of trust is done almost exclusively to obtain certain tax or asset protection results, which are beyond the scope of this summary. The assets of the revocable living trust will be available for immediate distribution after the death of the grantor, provided that sufficient assets are available to pay estate taxes; however, because you retain control while you are alive with a revocable active trust, the income is reported and taxed on your personal tax return. When a revocable living trust is established, a trustee is appointed who is responsible for managing the trust's assets for the benefit of the grantor during its lifetime. A revocable living trust is an estate planning tool that allows you to transfer your personal assets into a trust during your lifetime. This type of trust gives you control over how your assets are managed and distributed after your death. It also offers some protection against creditors and allows you to avoid probate court proceedings.
However, it does not provide as much protection as an irrevocable trust and it may cost more than creating a will. When creating a revocable living trust, it is important to understand all of its advantages and disadvantages before signing it. It is also important to consult with an attorney who can help you understand how this type of trust works and how it can benefit you in terms of estate planning. Finally, remember that while this type of trust does not provide as much protection as an irrevocable one, it still offers some benefits that may be worth considering.
