In estate planning, a living trust and a revocable trust are usually interchangeable. Both are considered revocable trusts. However, when one tries to define them just by the words used, a living trust can also be an irrevocable trust.
What is a revocable trust?
A revocable trust is a trust that can be changed, amended, modified, or revoked by the grantor while the grantor is alive. What makes a trust revocable is not its title or heading but the terms and provisions in the trust document. The trust document must contain language allowing the grantor to amend or revoke the trust.
What is a living trust?
Just from the words itself, a living trust can be defined as a trust created by the grantor while he is still living, where the grantor is still alive. Usually, a living trust is a revocable trust, where the grantor reserves upon himself the right to change, amend, modify or revoke the terms of the trust without need of beneficiary consent. However, there are trusts where the grantor is still living, but the terms of the trust contain language stating that the grantor cannot amend or revoke the trust’s provisions. In this case, even if the grantor is still living, the trust the grantor executed is an irrevocable trust.
Still, most estate planning lawyers will use the terms “living trust” and “revocable trust” interchangeably. Rarely, if not never, would you see a trust entitled “John Doe Living Trust” that is not a revocable trust. Most living trusts are styled as revocable trusts.
Most common form of revocable trust/living trust
The most common form of a revocable trust or living trust is the trust where the grantor is the trustee and the beneficiary. Because the grantor, trustee, and beneficiary are one and the same person, the grantor has total control over the trust property. There are also revocable trusts where the trustee and the beneficiary are different persons from the grantor. What is important in a revocable living trust is language in the trust allowing the grantor to modify or change who the trustee is and who the beneficiary is while the grantor is still alive.
What happens when a grantor in a revocable living trust dies
When the grantor in a revocable living trust dies, the trust becomes irrevocable. In the trust document, there is a successor trustee and successor beneficiaries. The successor trustee transfers the trust property from the grantor-trustee to himself and thereafter manages the trust property for the benefit of the successor beneficiaries.
The successor trustee also has a number of obligations that arise from the revocable trust becoming irrevocable such as getting a new tax identification number for the irrevocable trust, filing the appropriate tax returns, getting property appraised, etc. An estate planning lawyer and accountant can help you in this matter.
Should you need assistance in the making of a revocable living or an irrevocable trust, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at firstname.lastname@example.org.