What is a Revocable Trust?
A revocable trust, also known as a living trust, is a document whereby the Grantor (that’s you) creates an entity to own their property. This entity, the Trust, exists only in the legal sense, similar to a Corporation or Limited Liability Company. One thing to note: a trust is really pretty much worthless until you “fund” the trust. That is, you have to take the time to transfer the title of assets into the trust entity.
The Grantor usually also serves as Trustee to the Trust, but can appoint someone else as Trustee. Upon the Grantor’s death, the Trustee must be someone else. The Trustee has a duty to act in the best interest of the Trust, which includes such duties as maximizing the value of the Trust and making sure that the beneficiaries of the Trust are treated fairly and in accord with the terms of the Trust.
What does revocable mean?
The trust is called “revocable” because it can be changed at any time by the Grantor. This allows for an extreme amount of flexibility as the Grantor can transfer assets in and out of the trust at their discretion. Further, they can change who gets their assets upon their death, which allows them the absolute best planning opportunity as they can give assets to those that really need it.
What happens upon the Grantor’s death?
When the Grantor dies, the trust becomes “irrevocable” which means that it can no longer be changed. Thus, the new trustee must abide by those terms within the trust and cannot change it without a court order.
This article was brought by The Eastman Law Firm, an estate planning attorney in Kansas City.