What is a Revocable Living Trust?

A revocable living trust is usually a written document signed by the person (the "trustor") creating the trust naming a person to manage assets to be held in the trust (the "trustee") for a "beneficiary" on the terms and for the purposes the trustor specifies. A living revocable trust is revokable at any time during the trustor's lifetime if the trustor is competent.

Revocable living trusts are usually created by a declaration of the owner of the property that the owner holds some property or assets as trustee, or by a transfer of these assets by the owner during the owner's lifetime in trust to the trustee (called "living trusts ") or by a transfer property by the owner by will or by other instrument taking effect upon the death of the owner (called "testamentary trusts") to another person as trustee. All trusts must be funded by transferring the trust assets to the trustee of the trust to make your trust effective.

You can be the initial trustee of your revocable living trust. If you cannot act as trustee, a person whom you appoint can then act as successor trustee. The successor trustee could be your spouse who could also be your co trustee. If you or your spouse become incapacitated, the successor trustee assumes responsibility to manage your trust without any court action. At your death, the then trustee inventories your assets, pays your debts and taxes and your assets distributed as you direct in the trust. The trustee functions like an executor would in a probate of your estate but there is no probate action or court supervision.

These are many types of trusts and some of the trusts commonly used in estate planning are living trust and testamentary trusts. There are also a irrevocable life insurance trusts which are designed to hold and then distribute of life insurance proceeds in order remove the proceeds from your gross estate and eliminate estate taxes on the policies' proceeds.

Next: Why you should consider a living trust?