Revocable Trust

What Is A Revocable Trust?

A revocable trust can be modified after it is created without the consent of the heirs or beneficiaries during the trustor or grantor’s lifetime.

It is also known as a ‘living trust,’ ‘loving trust,’ or ‘inter vivos trust’ and helps individuals manage their estate if they become incapacitated by disease or aging.

The grantor reserves the right to amend or adjust the document as they see fit.

Revocable trusts do not evade estate tax, but they reduce tax burdens because they are not yet cast in stone although, they can help avoid probate.

Trustees and co-trustees manage the assets in revocable trusts, and they are generally preferred to wills for estate planning among the elite. 

Deeper Definition

It is a legal document by which the grantor’s assets are placed in a trust during his lifetime for distribution to the heirs at death.

It seems that the deceased’s estate is managed correctly or passed on to their beneficiaries at death.

It is very similar to a will in that it ensures the proper distribution of property. Still, unlike it, there are only provisions for the management of a small portion of the total assets of the grantor.

Many people use revocable trusts to avoid probate court, dragging on needlessly and wasting resources unnecessarily.

A significant disadvantage of revocable trusts is that they are still subject to acquisition beyond the grantor’s death if the grantor has enormous debts. The assets would be required to be liquidated to satisfy any legally aggrieved party. 

They are also open to being taxed by federal and state laws, unlike irrevocable trusts where all rights to ownership and control are forfeited upon transfer to the trust, and the assets are removed from the benefactor’s taxable estate.

Revocable Trust Example

Suppose a particular individual has an estate worth $1 million and sets up a revocable trust for the benefit of their two younger siblings. Cases like this imply that the assets’ ownership transferred to the trust, which could have the individual as a trustee and a trusted company as the successor trustee.

Assume 60% is transferred to the younger sibling and 40% to the older and passes not long after, trust becomes irrevocable, and the trust company sees the distribution of the assets as specified in terms of the trust.