A revocable living trust is an artificial entity used as an estate-planning tool that manages your assets during your lifetime and distributes them upon your death. It is called a revocable trust because you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.
A trust is setup by a property owner, called a “grantor,” who appoints a person to manage the trust, called a “trustee.” In the case of a revocable living trust (there are other kinds of trusts), grantors usually names themselves as the primary trustee and name a successor trustee to control the trust at the time of their death. When the grantor dies, the trust is no longer revocable.
The main attraction of a revocable living trust is to avoid the probate process. A trust may bypass the probate process because it is said to “live on” after the grantor’s death. In order to avoid the probate process, all of the grantor’s assets must be transferred into the trust prior to death. If all of the deceased assets are not in the trust, the estate may be subject to probate.
A living trust will also keep the distribution of the estate a private matter because it is not public record like the probate process.
A living trust will not exempt you from taxes or debts to creditors.
Creditors may claim debts from a trust up to two years after the death of the grantor. Because of this long waiting process, some trustees will submit the estate to probate simply to take advantage of the fact that creditors will only have a three month window to collect debts owed.
There are many pros and cons of a revocable living trust. If you are trying to decide whether or not one is appropriate for you, contact an Estate Planning attorney.