Revocable, precisely as it sounds. A revocable trust (RT) then, is one which the grantor (aka settlor or trustor) has the power to revoke even though the assets have been entrusted to and are owned by the beneficiary.
As the grantor may revoke or alter (via trust amendment) the provisions of the trust and therefore maintains control during his or her lifetime, there aren't normally tax advantages involved. Furthermore, a revocable trust may allow the grantor to earn income from the trust during his or her lifetime.
So why, you ask, involve yourself with a revocable trust? The answer is fourfold.
One, you can prepare for mental incapacitation in which the RT can be administered by your Disability Trustee instead of by a court-supervised judge in probate (usually up to two years) or by a guardian or conservator which can last much longer, five, ten or even twenty years.
Two, so the assets may pass directly to the trust beneficiaries.
Three: privacy protection. By avoiding probate, which is public by requirement, the assets can convey without public scrutiny.
Four, it pre-empts organization and requires you to get your house in order and be sure all title docs, account statements, corporate minutes, stock certificates etc are in order for the trust and helps avoid the calamity of your family or other beneficiaries having to bring order to your estate along with the associated confusion and potential discord.
A revocable living trust (RLT) allows you to exert some control from the great beyond (after you've made your exit) over the inheritance you bequeath. Better even, an RLT can take the place of a will and allows for the disposition of assets more quickly sans court supervision or probate. Revocable trusts become irrevocable, in most cases at least, only after the trustmaker dies and can be designed to break into separate irrevocable trusts for the lifetime of the spouse or husband, children or other beneficiaries.
Au contraire, irrevocable trusts are often utilized by high net worth individuals to bequeath assets the control over which is released for charitable purposes along with the associated tax advantages for the trustor and protection from creditors. Once assets are distributed to the Beneficiaries, creditors can attach them as they can any other property owned by the Beneficiaries. The legal & tax consequences are significant as the assets funded into a revocable trust are still considered yours for creditor and estate tax purposes, without protection if you are sued while alive or from state & federal estate taxes once you pass away
Per Wikipedia, 'A living trust, or inter vivos trust (inter vivos is Latin for "between the living"), is a trust created during a person's lifetime to either save money on taxes or set up long term property management. All living trusts are designed to avoid probate proceedings and may in addition be used to reduce taxes, safeguard financial privacy, and to regulate the use of assets if the owner becomes incapacitated, and for other purposes."
While the advantages of forming a trust, either revocable or irrevocable, are clear, there are certain disadvantages. First, there is more expense up front than simply writing a final will and testament. Nevertheless, a trust will allow your loved ones to avoid a costly court supervised guardianship over the long run.
Second, it takes time. You'll need to contact your banks, investment and insurance companies, and transfer agents to change account and stock ownership and update beneficiaries; issue new stock certificates or assign partnership or LLC interests for closely held businesses; re-title cars and boats; and sign and record new deeds for real estate. For many, especially those in their later years, time is precious and this is the most inconvenient factor.
Third, you still need to create a Pour Over Will & Final Testament to catch your unfunded assets and pour them into your trust.
Fourth, the period to contest a trust is much longer than for a will, the latter generally 30-90 days, the former one to five years but sometimes longer.
To further explore trust related issues, contact Maple Sweet Real Estate at maplesweet.com, via email at email@example.com, call toll free at 800.525.7965 or consult an attorney including those listed by Maple Sweet Real Estate.