Revocable Trusts 101: The Basics

A revocable trust is one of the most used instruments in estate planning to facilitate the management and distribution of assets, minimize probate costs and delays, and provide flexibility and privacy for the grantor(s) and their beneficiaries. This begs the question: What is a revocable trust?

A revocable trust is a legal arrangement in which an individual or couple (the grantor/s) normally transfer most of their assets into the trust during their lifetime(s) for the benefit of themselves during their lifetimes and ultimately for the benefit of their designated beneficiaries, normally their children, after their death(s). The grantor(s) retain the ability to change or revoke the trust during their lifetime.

Some of the key characteristics and elements of a revocable trust are:

• Trustor: The person who creates the trust and transfers assets into it. The trustor(s) can be an individual or a couple.
• Trustee: The person or entity responsible for managing the assets held in the trust according to the terms of the Trust. Initially, the trustors serve as the trustees and thus maintain control over the assets in the Trust. The trust document should designate at least one successor trustee to manage the trust in the event of the grantors’ incapacity or death.
• Assets: Property, investments, bank accounts, real estate, business interests, and other valuable items that the trustor(s) transfer into the trust.
• Revocability: The trustor(s) retains the right to modify, amend, or revoke the trust at any time during their lifetime. This flexibility allows the trustor(s) to adapt the trust to changes in their circumstances, wishes, or estate planning goals.
• Management during incapacity: A revocable trust includes provisions for the management of assets in the event the trustor(s) become incapacitated. The successor trustee named in the trust document can step in to manage the trust assets without the need for court intervention, which can be advantageous in avoiding conservatorship proceedings, which are extremely expensive and can take critical time to set up.
• Probate avoidance: Assets held in a revocable trust typically pass directly to the beneficiaries named in the trust document upon the  trustors’ death, bypassing the probate process. This can lead to faster and cheaper distribution of assets and increased privacy. This is because a trust administration generally occurs in private instead of in court, which is public.
• Privacy: Unlike a will, which becomes a matter of public record during probate, a revocable trust generally offers more privacy since its terms and the distribution of assets typically remain confidential.