What is a Revocable Living Trust

Revocable living trust is a legal document that deals with management and distribution of your property during your life as well as after you die. In simple words, it ensures that asset transfer takes place according to the terms and conditions laid down by you. The phrase 'revocable living trust' can be broken down into two parts revocable and living. It is revocable because you can amend it anytime you wish and living because you can create and execute it while you are still alive. In fact, it operates during the three phases, while you are alive, disabled and after your death.

What is a Revocable Living Trust

Revocable living trust is a written agreement that confers the rights of managing and distributing your property to a trustee, who ensures that your estate is transferred to the rightful beneficiaries. In this process the owner of the property converts it into a trust and acts as trustee until his or her death. Often husband and wife jointly act as trustees of their property. However, it is also not uncommon for people to appoint a third person or a corporate company as their trustee. Usually, these people are wealthy individuals who have assets worth millions of dollars. Thus, a revocable living trust involves three parties which are as follows:

Settlor: Settlor is a person who creates the revocable living trust document and provides trust funds. One can be a joint settlor with another family member while creating a family trust. Most of the assets of a trust are in the name of settlor(s) while they are alive.

Trustee: In simple words a trustee acts as a caretaker of the trust until it is transferred to its rightful beneficiaries. During the lifetime of settlor, he may himself choose to be the trustee of the trust. In that case, a successor trustee is also appointed to serve the trust, in case of death of the settlor. A trustee is paid for the services he offers to the trust. After the death of the settlor, it is the responsibility of the trustee to pay the taxes, final bills of the settlor and settle other financial matters.

Beneficiary: These are the individuals or an entity that receives the income from the trust. The settlors are the sole beneficiaries of the trust during their lifetime. However, after their death, their legal heirs or a charity can become beneficiaries. The settlors choose the beneficiaries during their lifetime, so that there are no disputes after their death. Settlors have the right to revoke the trust document and add or delete the beneficiaries or make any other amendment regarding the distribution of property.

Advantages of a Revocable Living Trust

There are several advantages of creating a revocable living trust. As it is revocable, the settlor can revise or terminate it at any point of time. After his death the document becomes irrevocable, thereby leaving no scope for legal disputes. Another great advantage is that you are relieved of the probate expenses. Besides, after the death of settlor, the entire proceeding is between trustee and beneficiaries without court or public intervention. This allows faster transfer of assets. Even in case of sale of assets by the beneficiary, no court order is required.

Although revocable living trust sure sounds impressive, it can never substitute for a will. Some of the provisions such as appointing guardian for minor children after a settlors death can only be made into a will. A will can stand alone or can be accompanied by a revocable living trust document.