We have seen clients use revocable trusts in powerful ways. They are a unique tool that allows people to control their assets for the good of others, protect and provide for their loved ones, and leave a legacy at the end of their lives. But what is a revocable trust? How does it operate? How does it differ from or relate to other types of trusts? And is this type of trust suited to your unique estate planning needs?
Let’s start by defining what a revocable trust is.
What Is a Revocable Trust?
A revocable trust is a trust that can be changed or revoked by its creator (also called the grantor). Like all trusts, a revocable trust operates according to a written trust agreement. This agreement is set up when the creator drafts the trust and is overseen by a trustee of the creator’s choosing; oftentimes, the creator is the trustee while they are alive.
[Related: For a more general article on what trusts are and how they operate, read “Do I Need a Trust?”]
Revocable Trusts in Relation to Other Trusts
There are many different types of trusts, such as irrevocable trusts, special needs trusts, asset protection trusts, and more. But how do they relate to or differ from one another, and where do revocable trusts fit in?
Here’s how it works: All trusts are either revocable or irrevocable when they are created. But there are also various types of trusts that serve different functions.
For example, a charitable trust is one that is specifically designed to bequeath money to a cause or organization you believe in. But a charitable trust can be either revocable or irrevocable, depending on how you set it up.
Other common types of trusts include minor’s trusts, annuity trusts, and charitable trusts, each specifically designed to serve a distinct purpose. And when created each are designated as either revocable or irrevocable.
Does My Estate Plan Need a Revocable Trust?
A revocable trust is one of several effective estate planning tools you can use to prepare for the future. However, whether it is a good fit for you depends on your life situation, relationships, and assets.
Many people choose to use a revocable trust when they need:
- extra control over their assets
- flexibility for how they use their assets
- strict privacy about their decisions
- greater freedom to care for loved ones in unique situations
The best way to determine if you should use this kind of trust is to consult with a knowledgeable estate attorney in your state.
Do you have more questions about what a revocable trust is and whether it is a tool you should use in your estate plan? Schedule an appointment with us. We would love to get to know you and answer any questions you may have.