In this article, we’re answering “What is a revocable trust?” This will include an introduction to this form of estate planning along with answers to common questions from our members.
Of course, if you are trying to decide which trust structure best meets your needs, you should speak with a qualified estate planning expert that understands your situation and the variables that could impact your plans.
This article is part of our free series on banking, estate planning, and the legal documents that surround them, including a free detailed guide to opening a private bank account for yourself and your family members.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
What Is a Revocable Trust?
A revocable trust refers to a specific type of trust structure in estate planning that allows the grantor (who can also be the trustee) to change the trust agreement, remove assets, change a beneficiary, or even terminate the existing trust.
Also known as a living trust, after the grantor passes, it automatically converts to an irrevocable trust. This enables probate avoidance and has other benefits.
However, assets within the trust are still subject to estate tax. Likewise, revocable trusts do not offer sufficient asset protection as creditors can still access the assets of the trust.
Importantly, after the trust converts to an irrevocable trust, the successor trustee is not able to make any changes. Essentially, the role of the successor trustee is trust administration and distribution of assets in accordance with the trust agreement.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into this topic. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What’s the Purpose of a Revocable Trust?
The purpose of a revocable trust is for the grantor to maintain some level of control over their assets while ensuring that they will be distributed according to their wishes after they die. Additionally, they also allow assets to avoid probate and be directly distributed to the beneficiaries.
What Is the Downside of a Revocable Trust?
The downsides of a revocable trust include cost, administration, and complexity when compared to wills. Additionally, they do not offer asset protection or tax advantages.
What Is a Major Benefit of a Revocable Trust?
A major benefit of a revocable trust is that the grantor can make changes to the trust in terms of assets, beneficiaries, or even the existence of the trust up until the point of their death. As a result of this flexibility, revocable trust is a popular tool in the world of estate planning.
Which Is Better: Revocable or Irrevocable Trust?
Whether a revocable trust or an irrevocable trust is better for your needs will depend on your specific circumstances and objectives. In particular, it will depend on the level of control that the grantor wants in terms of amending the trust during their lifetime, which is possible with a revocable trust but not possible with an irrevocable trust. In order to decide which option is best for you, you should speak with a qualified estate planning professional.
Can a Living Trust Be Revocable?
Yes, a living trust can be revocable. In fact, a revocable trust is often referred to as a living trust as well. This is because they can be changed at any point while the grantor of the trust is still living. After the grantor passes, the revocable trust automatically converts to an irrevocable trust.
Can a Revocable Trust Be Used in Estate Planning?
Yes, a revocable trust can be used in estate planning. In fact, they are commonly used as a replacement for a will in estate planning in order to avoid delays in asset distribution and avoid the probate process.
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