In a revocable or living trust, the trust creator (or grantor) retains rights over the trust, including the ability to change or revoke the trust at any time. Under a revocable trust, the grantor is typically named as the primary beneficiary during his or her lifetime.
In fact, the grantor may even act as his or her own trustee or designate another as trustee. Sometimes, a grantor will choose to name a corporate trustee during his or her lifetime so that he or she can see firsthand the administration of the trust and build a relationship with the trustee.
It is important to note that a revocable trust also creates a plan for incapacity. In the trust document, the grantor explains who will manage the trust and financial affairs in the event of incapacity—ensuring that management of the trust’s assets and property will continue according to the grantor’s wishes. Having this plan in place prevents the need for competency hearings and possibly expensive and/or lengthy court proceedings to appoint a conservator or guardian of the assets.
At death, a revocable trust can act like a will. It designates a successor trustee and describes how the grantor would like the assets distributed, while also avoiding probate. Bypassing probate can be beneficial—usually saving the estate money in legal fees and protecting the privacy of the deceased.
If you are interested in setting up a revocable trust for yourself, consult an estate planning attorney for personalized planning. A complete estate plan includes documents such as:
- Revocable Trust and/or Last Will and Testament
- Living Will (end of life care decision-making)
- Durable Health Care Power of Attorney (medical decision-making)
- Durable Financial Power of Attorney (asset and financial management decision-making)
More information on the importance of a living will and powers of attorney documents may be found on AARP.org.