A Revocable Living Trust is a document that specifies how you want your property to be distributed after your death. It's also referred to as an "inter vivos" trust because it's created while you're still alive and living, so it can be changed anytime during your lifetime.
Revocable Living Trusts are well suited to many types of families. Some people use them when establishing a new family estate, while others want to separate their assets into different parts of the estate for each child or adult child. Others use them when a minor needs their money in an emergency but doesn't yet qualify for a conservatorship.
How Does It Work?
The Revocable Living Trust sets up the structure for your estate, but the document doesn't transfer assets to it. Instead, you “fund” the trust during your lifetime and set up a separate document, called a pour-over will, to transfer assets into the Revocable Living Trust after your death. You will name a successor trustee who handles the trust's money, property and investments after you pass away or become incapacitated . This trustee can be a family member or professional and can be changed if necessary. (Some people choose to add additional successor trustees to take over in case the initial trustee cannot fulfill the role.)
Revocable Living Trusts are great for families because parents can leave their assets to their children without fear that their child's creditors will get the money. They can decide whether and when to change their wills and trusts, but they don't have to do it at an inconvenient time, like just before death.
A Revocable Living Trust lets you distribute your assets in any way you want without making a final decision, so it's better than a will in terms of flexibility and changeability. About half of Americans don't have wills in place, which means that if they unexpectedly die or become incapacitated, they could lose everything or be stuck with someone else's decisions.
You should be careful about the type of Revocable Living Trust you use, especially if you want to leave money and property to your children. Many people use a full asset protection trust, which means it's designed for people with lots of assets who want to avoid estate taxes.
Information provided is not intended as tax or legal advice, and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.