A trust is a legal arrangement where a person called a trustee holds assets on behalf of one or more beneficiaries. The trust document will state the rules that the person making the trust wants the trustee to follow when managing the trust property. A revocable living trust is created during the lifetime of the person making the trust. The trust names a trustee who holds title to the trust property and performs the day-to-day management of the trust. The creator of the trust retains the power to revoke the trust and take back the assets. The creator may also change the trust terms during their lifetime. The creator of the revocable trust is often a trustee and a beneficiary of the trust during his or her lifetime.
A person may want to create a revocable trust to have a plan in place if they ever become unable to manage their own assets. If the creator of the trust becomes unable to serve as their own trustee for health or other reasons, a successor trustee is named in the trust document. The successor trustee will then manage the trust for the creator’s benefit according to the instructions in the trust document. The trustee invests the assets prudently, and pays the creator’s debts and living expenses. The living trust is generally safer than a general power of attorney for purposes of managing the creator’s property in the event of his or her incapacity. The successor trustee can also continue trust administration without delay upon the creator’s incapacity.
Assets held in a revocable trust during the creator’s lifetime, or paid to the trust at the creator’s death by beneficiary designation, are not included in the creator’s probate estate. This could result in reducing the expenses of estate administration. A revocable trust also keeps the creator’s assets private because the trust document is private, unlike a will, which is a recorded public document. A person who is considering setting up a revocable living trust should talk to an experienced attorney who can advise them whether this type of trust would be beneficial for them.