Living Trusts—Revocable and Irrevocable
The main thing to remember about a living trust is that it is made and goes into effect while you are alive. Often, living trusts help you during your life and then give away the property after your death. The main reason for this is to avoid the probate process, which can be expensive and take a lot of time.
Although most people set up living trusts to benefit their families, you can name anyone as a beneficiary, including yourself. For example:
- You can put an investment account that brings income into a trust and name yourself as beneficiary while you are alive and then, after you die, have the income go to your spouse, children, and/or other relative, friend, or charity.
- If you have a terminal illness, you can establish a living trust and put the title to your antique car into the trust for your benefit until you die, then afterward, for the benefit of your best friend, and when he dies, for the benefit of his son.
In each of these examples, after your death, use of the property or receipt of income from the trust passes to the beneficiary outside of the probate process. This saves time by avoiding a probate proceeding.
When you create a living trust, you must place the principal into the trust once the trust document is signed. For instance:
- If the principal is a house, you must execute a new deed giving it to the trust.
- If the principal is a car, you must transfer the title to the trust.
- If the principal is a bank account, you must transfer the funds to a new bank account in the name of the trust.
Revocable Living Trust
The creator of a living trust decides whether it can be changed or revoked. If you include a paragraph in the trust that says it can be changed or revoked, then it is called a “revocable living trust.” In that case, you can easily amend or revoke your trust.
Irrevocable Living Trust
You may include a statement in the trust that it cannot be amended and revoked. This makes it an irrevocable living trust. However, the law allows even irrevocable trusts to be amended or revoked under certain circumstances.
Legal Editor: Jill A. Kupferberg, March 2015
Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.