Revocable Living Trust

A Guide to Revocable Trusts

A revocable living trust is created through a document called the “trust agreement”.  It is created by you to manage your assets during your lifetime and distribute the remaining assets after your death. A trust is “revocable” when you can modify or even terminate the trust during your lifetime, unlike a more permanent irrevocable trust.  After the revocable trust is created, the trustee invests and manages the trust property that was provided by the grantor. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amounts.

To begin a revocable trust, your assets such as bank accounts, real estate, and other investment devices must be formally transferred into the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust itself, as if it was a person or business. Assets that are not properly transferred to the trust may be subject to probate without trust protection.

If you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This can often be a great advantage as you may be able to avoid the need for a court-appointed guardian of your property while you are incapacitated.  Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. 

There can be many complexities in the creation of a trust.  For example, certain types of assets should not be transferred to a trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.  Contact us today to discuss revocable trusts and whether they are right for your situation!