What is a Revocable Living Trust?

June 14th, 2024
Posted By
Sarah M. Litowich
Information about Living trust and glasses on it - revocable living trust concept
The first thing that comes to mind for most people when it comes to estate planning is a last will and testament. However, there are also a number of other tools that can be used to carry out your objectives. A revocable living trust can be an important part of a comprehensive estate plan. Not only can it allow you to decide how your assets will be handled when you pass away, but you can also remain in control of your property and make changes during your lifetime.

What is a Revocable Living Trust?

A revocable living trust is a type of trust that you create while you are alive. It is effective during your lifetime and determines how the assets in it will be handled after your passing — it also allows you to retain control of the property that you place in the trust. The assets that can be placed in a living trust can include bank accounts, real estate, investments, art, stock, and even personal possessions. Specifically, a revocable living trust can be set up in three steps:
  • Drafting the trust instrument — A trust instrument must be drafted which provides instructions regarding how the assets should be distributed to the beneficiaries.
  • Naming a trustee — Most people name themselves as the trustee of a revocable living trust. However, a successor trustee who will take over managing the assets in the event of incapacity or death will need to be named in the trust instrument.
  • Placing your assets in the trust — Once you have drafted the trust instrument, you must fund the trust in order for the trust to be valid. This means transferring assets into the trust or retitling them in the name of the trust.
Once you have created a trust and funded it, you no longer own the assets that are in the trust — they belong to the trust. However, with a revocable living trust, you can still retain control of the assets while you are alive even though they no longer belong to you.

Do You Need a Revocable Living Trust if You Have a Will?

Even if you have a last will and testament in place, you may still consider using a revocable living trust to ensure there are no gaps in your estate plan. Critically, both tools serve different purposes. While a will is only effective once you pass away, a revocable living trust can be used to manage your property while you are still alive. Notably, a revocable living trust can have several benefits, including the following:
  • Avoiding probate — Unlike a will, a living trust can avoid the lengthy, costly, and public probate process. This means your assets can be passed to your beneficiaries without court intervention.
  • Distributing assets directly — Your beneficiaries can receive their inheritances faster and without the delay that is often associated with probate.
  • Privacy — Since the assets in a revocable living trust do not go through the public probate process, you can maintain privacy and confidentiality regarding your family finances.
  • Flexibility — Since a revocable living trust allows you to create and manage it yourself while you are alive, it offers a significant amount of flexibility.
In addition to planning for what will happen to your assets after you die, a revocable living trust can also provide protection in the event you become incapacitated and cannot make decisions for yourself. In such cases, you can name a trusted friend or family member as a successor trustee who can control the assets in the trust in accordance with your instructions.

Are There Disadvantages to a Revocable Living Trust?

While revocable living trusts have several major benefits, such as avoiding probate, providing privacy, and offering protection in the event of incapacity, there are a few cons that should be noted. Unlike irrevocable trusts, revocable living trusts do not have direct tax benefits for the trust creator. The assets in the trust will incur taxes on the income or gains. They will also still be subject to creditor claims and legal judgments. Another disadvantage of a revocable living trust is that it can result in additional administration expenses and be costly to upkeep. These types of trusts may also require continual review and can result in administrative difficulties if unique assets are placed in them. However, for many people, the pros of a revocable living trust outweigh the cons. It’s crucial to discuss your financial and estate planning goals with an experienced attorney who can assist you with creating a strategy that will help ensure you achieve them.

Contact an Experienced Oregon Estate Planning Attorney

A revocable living trust can be an essential component of your estate and incapacity plan. It’s best to work with an experienced estate planning attorney to ensure your estate planning objectives are satisfied. Based in Salem, Litowich Law provides clients throughout Oregon with compassionate counsel for estate and incapacity planning matters. We welcome you to contact us to schedule a consultation to learn how we can help.
Categories: Estate Planning