What is a revocable trust?

A revocable trust, also known as a living trust, can solve estate planning problems that wills cannot address. You might use a revocable trust alongside a will for many reasons. For example, a revocable trust can provide privacy for you and your beneficiaries when assets are distributed.

You can fund revocable trusts with a variety of assets. Transferring certain assets can be complicated and may require the help of an attorney.

When you’re the grantor of a revocable trust, you remain the owner of the trust assets and still must report all income generated on your personal income tax return. Because you remain the owner there is generally no tax impact to your beneficiaries during your lifetime.

Reasons to consider a revocable trust

  • You own specialty assets. You hold real estate, artwork and other assets that may be difficult to distribute to beneficiaries.

  • You hold assets in more than one state. Without a revocable trust, assets in more than one state – including real estate – are subject to a separate probate process for each state.

  • You have health concerns. If the grantor becomes incapacitated, the trustee – instead of a court-supervised guardian or conservator – can manage assets held in the name of a revocable trust.

Setting up a will

Creating a Last Will and Testament (a will) is especially important for people with young children, because wills are the best way to provide for guardianship of minors.

A pour-over will, a type of will often used with a living trust, can also ensure that overlooked assets not transferred into the trust prior to your death flow from your probate estate into the trust. In other words, all property that passes through the will at your death is ‘poured into’ your trust. If you haven’t specified in a will where those assets should go, a court may distribute them to heirs you didn’t intend.

Irrevocable trusts: Another option to consider

Looking for a trust that can minimize estate taxes, provide asset protection or help you leave a lasting charitable legacy? Consider an irrevocable trust.

Insights from our experts

How to prepare for your trust planning meeting

What you need to know to make your meeting as successful as possible.

How to choose a trustee of a trust

Naming your trustee is a critical step in setting up a trust.

Trust planning questions for beneficiaries to ask

Questions to ask your parents/trust administrator about the trust process – from the beneficiary’s point of view.

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