A revocable living trust is a powerful legal instrument. They help people protect assets, manage their finances and provide for their families. People may start trusts after becoming homeowners, getting married or having children. Business ownership and pre-retirement planning are also common reasons people establish revocable living trusts.
The name of a revocable living trust implies that the terms are subject to change and that the trustor who funded the trust is still alive. They can modify the terms set and change beneficiaries as they see fit. When the trustor eventually dies, the trust undergoes several significant changes. The two below are among the most important to understand when creating or revising this kind of trust.
A successor trustee takes control
Often, the trustor who funds the trust is also the initial trustee. They may spend years or even decades managing trust assets on their own behalf and preserving them for their beneficiaries to access in the future. Trust documents generally need to include information about a successor trustee who assumes administrative responsibility when the initial trustee dies or becomes incapacitated.
The trust becomes irrevocable
Most of the time, revocable living trusts convert to irrevocable trusts when the trustor dies. The trust is no longer subject to modifications, meaning that the final terms set by the trustor are what guide the management and distribution of the trust resources after their passing.
The support of an estate planning attorney while creating a trust can have a profound impact on its long-term viability. Careful planning and appropriate structure can minimize the likelihood of issues arising after a trustor dies.
