You probably have heard that a revocable living trust can serve as an alternative to a will. This is true, and a trust actually offers several advantages over a will, such as avoiding probate, allowing you to set conditions, and minimizing estate taxes. You may be wondering how a trust works, however, or you may be wondering what the “revocable” part of a revocable living trust means. This simple guide will answer these questions and make it perfectly clear why you might want a trust instead of a will.
What Is a Trust?
A trust is essentially just an agreement with an individual to pass your possessions along. While trusts are commonly used to handle one’s estate after death, trusts are set up all the time for all sorts of purposes.
When you set up a trust, you would become the benefactor. The individual who receives your possessions to hold is called the trustee. And the person who finally receives your possessions is called the beneficiary. At the time you transfer items or money to the trustee, you would also set the conditions of the trust. If you are using it to plan your estate, the condition would likely be your death. In addition to the main condition, you can also set smaller conditions that determine exactly how your estate is distributed. For example, you can decide that your granddaughter will receive your car only if she has her driver’s license at the time.
What Is a Revocable Living Trust?
The term “revocable” may sound scary, as if there’s some way to have your trust revoked and your estate lost. In reality, the revocable nature of a living trust is strictly for your benefit. It refers to how final the trust is after you set it up.
In an irrevocable trust, it is completely impossible to access the contents of the trust until the conditions you originally set are met. If you change your mind, or circumstances change, you can never change the conditions of an irrevocable trust. These kinds of trusts are typically used as a way to protect the contents of the trust from taxation, debt collectors, or the authorities.
A revocable living trust, on the other hand, preserves the benefactor’s right to access the contents of the trust at any time. The “living” part of the term refers to the way many people continue to live off the estate in the trust after setting it up. An estate planning lawyer will be able to explain whether a trust is a good idea for your situation.