In simple terms, a revocable living trust is a trust that can be modified or terminated at any time.
In more technical terms, a revocable living trust is a legal contract where the settlor has control over their assets throughout their life or until they are incapacitated. Upon their death, the trust becomes irrevocable and can no longer be changed, nor is it subject to probate. Probate is the legal process of administering an estate under court supervision. The settlor (also referred to as the grantor or transferor) is the person who owns the assets in the trust. The settlor of the trust names a trustee to legally handle the assets to use for the benefit of one or more beneficiaries.
Let’s take a look at an example. A mother sets up a revocable living trust and is now referred to as the settlor. She names her husband as the trustee to handle the distribution of her assets to their children, the beneficiaries. Later in life, the mother and one of her sons become estranged and no longer have a relationship. The mother modifies the revocable living trust to remove that son from the trust. She can do so because she set up a revocable living trust. Eventually, the mother passes away and the trust then becomes irrevocable and can no longer be changed.
Revocable Living Trusts vs. Irrevocable Trusts
Similarly, an irrevocable trust is also a legal contract that specifies how your assets to be distributed. In a trust, you designate the trustee who has the authority to handle and distribute your assets to your beneficiaries.
The most important difference between revocable living trusts and irrevocable trusts is that revocable trusts can be changed at any time, while an irrevocable trust cannot. Irrevocable trusts cannot be changed without the permission of everyone involved in the trust or a court. Revocable living trusts can be modified or even canceled at any time, for as long as the settlor is alive and in capacity. However, as soon as the settlor passes away or become incapacitated, the revocable living trusts becomes irrevocable.
What Are the Advantages of a Revocable Living Trust?
One of the biggest advantages to a revocable trust is that it can help prevent probate proceedings in multiple states for a person who owns properties in more than one state.
The other advantage is the privacy. A revocable trust is not subject to probate, therefore, the trust will not be revealed in a public setting.
If you have questions about revocable living trusts, please contact us at (410) 296-6777. Our offices remain open and our team can remotely provide our full range of services during this time.