What is a Revocable Living Trust?

A Revocable Living Trust is simply a written set of instructions for the management and distribution of your property.

The major difference between a Will and a Revocable Living Trust is that the Revocable Living Trust is immediately effective. Since it is effective when it’s created and funded, it is instrumental in planning for the possibility of your incapacity from an illness or accident.

A Revocable Living Trust can be revised or revoked at any time prior to your incapacity or death. There is no initial income tax effect when you create your Trust, and you can continue to use your own tax identification number for your Trust.

During your lifetime, your trust is held and used in your best interests. On your death, your property is either retained in trust or distributed to your beneficiaries, as you directed. There is no court involvement.

Your Living Trust Team.

There are three primary roles when you create your Revocable Living Trust – the grantor, the trustee and the trust beneficiary.

• Grantor. A Trust is created by a Trust Agreement. The grantor is person who creates and controls all aspects of the Trust. You are the grantor of your Trust.
• Trustee. The trustee is the person (or company) who manages the Trust and the Trust property according to the terms and rules set forth in the Trust Agreement. You can be the initial trustee of your Trust or you can appoint another individual or a corporate trustee.
• Backup Trustee. The backup trustee steps in when the initial trustee can’t act any more (usually because of death, incapacity or resignation). There is no court involvement when the backup trustee takes control of the trust management.
• Beneficiary. The trust is held and used for the benefit of the person known as the beneficiary. Initially, you are the primary beneficiary of your trust. Your wife and children may also be named as beneficiaries.

The Disadvantages of a Revocable Living Trust.

The Revocable Living Trust combines all the advantages of a Will with the ability to transfer control of your property if you become incapacitated, all without involvement of the courts.

There are two slight disadvantages of a Revocable Living Trust. First, it forces you to organize your property so that the property can be transferred to the Trust. Second, certain fees are paid currently, rather than after your death. All in all, nothing significant.

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