What is a Revocable Trust? Basic explanation of a Trust and how it functions.
What is a Revocable Trust?
A Revocable Trust is also known as a Living Trust. It is a legal document that is created by you (or you and your spouse) to manage your assets, such as real property and investments during your lifetime and distribute the remaining assets after you pass away.
The person that creates the Revocable Trust is known as either the "Grantor" or "Settlor". The person who is then responsible to manage the trust assets is known as the "Trustee" or "Successor-Trustee". There are many options available to who can serve as Trustee. You can serve as Trustee, you and your spouse can serve as Co-Trustees, or you could appoint a family member, close friend, bank or Trust Company to serve as your Trustee. What makes a Revocable Trust "revocable" is the fact that you may terminate or modify the trust during your lifetime, which essentially means that you have full control over the trust. There is a caveat to your full control over the Revocable Trust because your full control terminates not only at death but at your incapacitation as well.
If you become incapacitated the Trustee or Successor-Trustee is authorized to continue to manage your Trust assets and help preserve the estate according to your terms and wishes. Another benefit is the Revocable Trust may help avoid the need for a guardian to be court-appointed over your property.
Trustee and Successor-Trustee's Basic Duties
When you pass away the Trustee or the Successor-Trustee will then step in and pay bills, claims, taxes and distribute your remaining assets to your beneficiaries, as described in your private trust agreement. In order for a Revocable Trust to function as intended it is important to have all necessary assets "funded" into the Revocable Trust.
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