What Is a Living Revocable Trust?

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 What Is a Living Revocable Trust?

Generally speaking, a trust typically covers three distinct phases of its creator’s life:

  • Phase one includes those times when the creator is still alive and well;
  • Phase two covers any period of the creator’s life in which they become mentally or physically incapacitated; and
  • Phase three refers to everything that happens after the creator dies. 

A living revocable trust, also known as a “revocable inter vivos trust”, is a specific type of trust that is formed while the creator of the trust (i.e., the settlor) is still alive. Unlike other kinds of trusts, a living revocable trust allows the settlor to modify, amend, or revoke the trust in accordance with their own desires and intentions. 

For instance, if certain assets being held in the trust were originally meant to be distributed to the settlor’s spouse and their spouse files for divorce, then the settlor can revoke the terms of the trust. They can amend it to have those assets assigned to a different beneficiary. 

In cases where the trust document does not provide specific instructions or conditions, then the trust can be revoked at any time prior to the settlor’s death. It should be noted, however, that state laws can vary widely when it comes to the requirements of setting up and managing a living revocable trust. Thus, you will need to think about your goals and the types of property you own before you decide to form a living revocable trust.

Finally, if you need help setting up a living revocable trust, you should contact a local estate planning attorney for further guidance. An attorney can make sure that your trust is formed properly and is valid in the eyes of the law. Your attorney may also be able to provide some advice about which types of assets can benefit from being placed in a trust. They can also discuss whether your estate will be able to avoid the entire probate process. 

Why Make a Revocable Trust?

The main reason as to why anyone would want to create a living revocable trust is to avoid probate. This can help their surviving beneficiaries to retain more of the trust property as well as can protect the trust property from being reduced during the probate process. Some other reasons that a person might want to form a living revocable trust include:

  • To take advantage of the various tax benefits that many states offer for creating a living revocable trust;
  • To afford greater protections over the assets that the settlor’s surviving spouse is set to inherit;
  • To give the beneficiaries access to the assets in the trust sooner than they would be able to had the creator decided to make a will instead;
  • To become both the settlor and trustee of the living revocable trust if the circumstances would support it;
  • To prevent issues with the trust from arising in the future if the settlor can foresee or already knows about a subject that may warrant making changes to the conditions of the trust; and/or
  • To provide greater flexibility and control over the assets in the trust for the benefit of its creator and any other interested parties (e.g., the trust beneficiaries, trustees, etc.).

As previously discussed, living revocable trusts can be revoked, modified, and amended. This is in direct contrast to living irrevocable trusts, which are nearly impossible to change once their contents have been distributed to the entitled beneficiaries. Thus, living revocable trusts can be very useful if the settlor believes they will need to make adjustments or changes to the terms of the trust at some point in the future.

Additionally, living revocable trusts tend to be less expensive and much easier to set up than other kinds of estate planning tools.

What Are Some Disadvantages of Living Revocable Trusts?

On the other hand, living revocable trusts also have some major disadvantages to them. Some reasons as to why an individual may not want to use a living revocable trust include the following:

  • Living revocable trusts only protect those assets and property that are specifically mentioned in the trust document. Thus, if the settlor wanted to manage or transfer a larger portion of their estate or their entire estate to the beneficiaries, then they might need to create a separate document to do so (e.g., a will).
  • Another disadvantage of living revocable trusts is that they do not authorize the trustee or the trust beneficiaries to act entirely on a settlor’s behalf. Again, the settlor will need to create a different type of document or may need to appoint someone to have power of attorney to make decisions regarding the trust. 
  • Once the contents of a living revocable trust are distributed, it can be very difficult to reclaim them. This can also cause a problem for the settlor if they need to change the terms of the trust document.
  • The laws governing living revocable trusts can vary widely from state to state. Thus, if the settlor decides to move before they die, then they will need to make changes to the trust document to ensure that it conforms to the laws of their new state. The settlor will need to be extra careful in reviewing the laws if they have other estate planning documents that interact with the trust document as well.

Finally, while this does not entirely affect the settlor of the trust, the beneficiaries to a living revocable trust should be aware that the conditions of the trust may change. This is because the settlor will be allowed to amend the trust at any point during their lifetime, which in turn, can impact what a beneficiary receives by the time the assets in the trust are distributed.

Should I Hire a Lawyer for Help with a Living Revocable Trust?

In general, the requirements to set up a living revocable trust can be very difficult to follow without the assistance of a lawyer. For one, the trust documents must comply with various trust and estate laws. Also, the trust document must be written in a way that conforms to how a living revocable trust must be formed. This is especially important when it comes to writing the conditions for a living revocable trust.

Thus, if you need more information about living revocable trusts or if you have already decided to use and need help with setting up a living revocable trust, then it may be in your best interest to hire a local living trust attorney as soon as possible. 

An experienced estate attorney will be able to determine whether a living revocable trust is the right form of trust to use to protect your property. Your attorney can also help you draft, revise, and review the legal documents required to form a valid living revocable trust, as well as can assist you in modifying or revoking the terms of an existing living revocable trust.

In addition, if the contents of your living revocable trust have already been distributed to its beneficiaries, your attorney can find out if there is any way that you could potentially still change the terms of it and reclaim those assets. 

Lastly, if you are involved in a dispute or a lawsuit that involves a living revocable trust, your attorney will be able to provide legal representation in court as well. 

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