What is a Revocable Living Trust?

A trust is a legal relationship where property is held by one person (the trustee) for the benefit of another person (known as the beneficiary). The person who creates the trust is called a grantor (or trustor or settlor).

A Revocable Living Trust (“RLT”) is a special kind of trust. Typically, in a Revocable Living Trust, the grantor serves as the initial trustee and as the beneficiary while he or she is alive. This means that the grantor maintains complete control over the property while still alive. The grantor titles all of his property in the name of the trust. The grantor establishes, in the trust document, who will be his successor trustee. When the grantor passes away, his trust stays intact, with a successor trustee stepping into his shoes to wrap up his estate and make distributions to his heirs.

The result of this kind of trust is that the grantor owns nothing in his own name at his death because all of his assets are within the trust. Because his assets are not in his own name, he avoids the probate process.

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The Benefits of a Revocable Living Trust

  • Can reduce estate taxes by doubling the unified credit amount.
  • Avoids the probate process.
  • Probate is very time consuming and expensive.
  • Allows for your beneficiaries to inherit in the form of their own trust which they control.
  • Makes their inheritances creditor-, bankruptcy-, lawsuit- and divorce-proof.
  • Names the guardian and conservator of yourself should you become incapacitated.
  • After the death of a spouse, a trust protects ½ of the estate from any creditor claims of the surviving spouse.
  • A portion of the fee is tax deductible.
  • Allows for flexibility:
  • You can make distributions to your beneficiaries at an age you deem appropriate.
  • You don’t want to create trust-fund babies. Implement rewards and incentives while still leaving flexibility for the unexpected.
  • Match beneficiary’s work earnings.
  • Make distributions contingent on public service.
  • Allows you to teach your beneficiaries about investing.
  • Gives discretion to a trustee if a beneficiary is in trouble with finances, drugs or alcohol.
  • Plans for the unexpected (death or incapacity of a beneficiary).
  • If you are remarried and have children from a previous marriage, a trust will protect both the surviving spouse and the beneficiaries.
  • If you want or intend to give a portion of your estate to your children from a previous marriage, be sure the trust is drafted that those bequests become irrevocable upon your death.
  • Also, plan for the possibility that your surviving spouse may remarry after your death. Be sure your estate stays in your family.

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