One of the most common questions we get in our office is “What is the difference between a revocable living trust and a trust?”. The answer is very simple: nothing. So, what exactly is a revocable living trust? Let’s break it down. A trust is a valuable estate planning document which allows you to have control over your assets and avoid probate while maintaining privacy over both your assets and your estate plan. Now what about the revocable and living bits? The terms living and revocable essentially mean the same thing. The terms Living Trust, Revocable Living Trust, and Revocable Trust all refer to the same document and are documents that can be modified over time. These documents have the ability to grow and “live” with you.
How do you know if you should have a revocable living trust?
The answer depends on many factors and we can help you answer that question. We will get to that in another post. For now, let’s wrap our heads around the idea of a trust. Understanding what a document does for you helps you understand if you need a document.
What is a Trust?
Think of your trust as a bucket. When the trust document is created, you are creating a bucket. You are in charge of your bucket and are a named trustee (in a Trust, the Trustee is the one in charge of the bucket). You have also named a successor trustee, someone else to take care of the bucket after you pass away or if you become incapacitated. Attached to the handle of the bucket are a list of instructions. The trust document is that list of instructions. And while you are alive, you are going to place your assets in the bucket – your home, bank accounts, retirements accounts, personal property, and your investment accounts, just to name a few. When you are no longer able to care for the assets because you are either incapacitated or you have passed away, the bucket is passed on to the next person you named in the trust document. They will care for and distribute the assets in your bucket by following the instructions you left for them on the handle, the trust.
What makes that Trust Revocable?
There are many different kinds of trusts that can be drafted, but when the trust document drafted is a revocable living trust, you are able to change those instructions attached to the handle of the bucket as your life changes. You may have listed someone as your successor trustee who has passed away, or has a life circumstance which would make it extremely difficult to care for your estate. Perhaps you named a sibling as your successor trustee but now your children are old enough to be named as a successor trustee. Having a revocable living trust allows you to make changes to the document, allowing the plan to change and grow as your assets grow and as your life inevitable changes.
Do you need a trust? We can help you decide if a revocable living trust is the best for your and your family.