A Revocable Living Trust is a trust created during your lifetime to hold property that you transfer to it. It has a currently-serving trustee (who may be you) who manages the property for your benefit. It can be revoked or amended during your lifetime. On your death, the Trust may direct that the property be continued in trust or distributed outright to beneficiaries.
A Revocable Living Trust is a very good tool for preparing for disability. In a Revocable Trust, you can name a successor or co-trustee who can manage the property for your benefit if you become incapacitated.
A Revocable Living Trust also avoids probate. Much has been written about this advantage of such a trust. Probate laws vary from state to state. If “avoiding probate” is the primary reason for setting up a Revocable Living Trust, the actual costs and benefits of a Will and a Trust in each specific situation should be compared. Good estate planning is not a “one size fits all” proposition. The goal is to design the most cost-effective estate planning tool for each client.
A Revocable Trust alone hardly ever totally avoids probate – a Pour-Over Will should be executed at the same time as the Living Trust to direct any assets not transferred to the Trust before death to the Trust.
A Revocable Trust does not avoid estate or inheritance tax or the tax on any income earned by the trust before distribution. A properly drafted Will can often be as effective in reducing the time and expense and administration.