In simple terms, a living revocable trust is a legal document that provides for the management of property. It is called “living” because the grantor, the person who establishes the trust, is alive when he or she creates it. It is considered “revocable” because the grantor can amend or terminate the trust at any time during his or her lifetime.

The main benefit of a living revocable trust is that it allows the transfer of a grantor’s property upon death to beneficiaries without probate court administration. A court is not involved in the inventory and distribution of assets. Therefore, the grantor’s affairs remain private. The trust avoids the time and expense usually associated with a probate estate. Living revocable trusts may also manage a grantor’s property during the grantor’s lifetime if he or she is unable to conduct their business affairs due to a medical condition or mental incompetency. 

The trust is controlled by a trustee. Normally, the grantor serves as the trustee while he or she is living. Couples can create a shared living revocable trust. In a shared trust, the couple usually serves as co-trustees. The trust can provide that either grantor may conduct trust business. The grantor most often names successor trustees to take over trust responsibilities when the grantor dies or in the event the grantor becomes incapacitated.  Successor trustees can be spouses, children, or professional trust companies. The trust sets forth how much the successor trustee may charge for his or her services.

A living revocable trust can hold title to real property, bank accounts, vehicles and equipment, stocks, and brokerage accounts. Grantors may also name the trust as a transfer on death beneficiary on life insurance policies or retirement accounts. 

Living revocable trusts are very flexible. The grantor can add or withdraw property from the trust at any time. Normally, real property is transferred into the trust by a quit-claim deed. Bank accounts and brokerage accounts are easily updated to title the account in the name of the trustee. 

The grantor does not lose control of the trust assets. They are still considered the grantor’s legal property. The trust does not require a separate tax identification number. All trust accounts will reflect the grantor’s social security number. Therefore, the grantor will not have to file a separate tax return for the trust. All interest income or dividends earned on trust property are reported on the grantor’s individual tax return.

When establishing a trust, it is important to consult with a trusted attorney to make sure that it is drafted properly and specifically tailored to the needs of a grantor. That way, the grantor’s assets will be administered smoothly and efficiently upon death or incompetency.  The attorneys at Laribee Law, LLP are here to assist you.

Michael Laribee is a partner in the Medina law firm of Laribee Law, LLP. This article is intended to provide general information about the law. It is not intended to give legal advice. Readers are urged to seek advice from an attorney regarding their specific issues and rights.