Definition§
A revocable trust is a legal arrangement where a trustor transfers assets into a trust during their lifetime while retaining the ability to alter or revoke the trust at any time until their death. This type of trust ensures that the trustor maintains control over the assets and allows for considerable flexibility.
Key Features:§
- Control: The trustor can modify, amend, or revoke the trust at any point during their lifetime.
- Flexibility: Changes can be made as often as needed to adapt to changing circumstances or wishes.
- Beneficiaries: The assets are designated to the heirs (beneficiaries), who will receive them after the trustor’s death.
Examples:§
- Retirement Planning: An individual may use a revocable trust to manage their assets as part of their retirement planning strategy, ensuring easy transfer of assets to beneficiaries without probate.
- Family Trust: Parents might set up a revocable trust, allowing them to modify the trust terms as their children’s needs change over the years.
Frequently Asked Questions (FAQs):§
What is the primary advantage of a revocable trust?§
The main advantage is the ability to maintain control over and ability to modify or undo the trust during the trustor’s lifetime, offering adaptability to changes in circumstances or wishes.
How does a revocable trust avoid probate?§
Assets in a revocable trust typically bypass the probate process because they are held in trust and directly transferred to beneficiaries upon the trustor’s death.
Can a revocable trust protect assets from creditors?§
No, because the trustor retains control over the assets within a revocable trust, those assets are generally not shielded from creditors.
Does a revocable trust help with estate taxes?§
Unlike irrevocable trusts, revocable trusts do not avoid estate taxes, as the assets remain part of the trustor’s taxable estate until death.
Who controls a revocable trust after the trustor’s death?§
After the trustor’s death, the named trustee manages or distributes the assets according to the terms of the trust.
Related Terms:§
- Irrevocable Trust: A type of trust that cannot be altered or canceled once it is established, permanently transferring assets to the trust and offering protection from estate taxes.
- Trustee: The individual or entity responsible for managing the trust’s assets in accordance with the terms of the trust agreement.
- Probate: The legal process of validating a will and distributing the deceased’s assets under court supervision.
- Estate Planning: The process of organizing and managing an individual’s assets to ensure their efficient distribution after death, including trusts, wills, and other tools.
Online Resources:§
Suggested Books for Further Studies:§
- “Living Trusts for Everyone: Why a Will is Not the Way to Avoid Probate” by Ronald Farrington Sharp
- “The Complete Book of Trusts” by Martin M. Shenkman
- “Make Your Own Living Trust” by Denis Clifford
Fundamentals of Revocable Trust: Estate Planning Basics Quiz§
Thank you for exploring the intricate details of revocable trusts with us. We hope this information enhances your understanding and aids in strategic estate planning.
