A revocable living trust is an estate planning tool used to manage assets during someone`s lifetime and, often, to pass assets to beneficiaries after the grantor`s death. The word “revocable” means that the trust can be changed, modified, or terminated at any time by the grantor. This flexibility is an attractive feature of a living trust because it allows the grantor to retain control over their assets and make changes as their circumstances change.
One of the key components of a living trust is the trust agreement. This document lays out the specifics of how the trust will be managed and distributed. If you are considering a revocable living trust, it`s important to understand how the revocability of the trust agreement works.
The most important thing to know about a revocable living trust is that the grantor can change or revoke the trust at any time, for any reason. This means that the terms of the trust agreement can be altered or eliminated altogether. For example, if the grantor decides they don`t want a certain beneficiary to receive any assets from the trust, they can revise the trust agreement to reflect this change.
However, it`s important to understand that the revocability of a living trust is not an excuse to be careless or disorganized with your estate plan. The trust agreement is a legally binding document, and any changes or revocations must be properly executed according to state law. Failure to follow the correct procedures can result in the trust being deemed invalid, or may lead to unintended consequences.
Another important consideration is the effect that the revocability of a living trust may have on taxes. Because the grantor retains control over the trust assets, the trust is typically considered part of the grantor`s estate for tax purposes. This means that the value of the trust may be subject to estate taxes upon the grantor`s death.
However, a revocable living trust does offer some advantages over a will. For one, the trust is not subject to probate, which means that assets can be distributed more quickly and efficiently after the grantor`s death. Additionally, the trust provides privacy, as the terms of the trust agreement are not part of the public record.
In summary, a revocable living trust can be a valuable estate planning tool for those who want to retain control over their assets and the flexibility to make changes as needed. However, it`s important to understand the revocability of the trust agreement and to follow proper procedures when making changes. With careful planning and execution, a living trust can help ensure that your assets are managed and distributed according to your wishes.