The revocable living trust

What it actually is

A revocable living trust is a written arrangement in which you, the grantor, transfer property to a trustee (normally yourself) to hold for your own benefit during your lifetime and then distribute according to your instructions. Because it is revocable, you can amend or cancel it at any time while you have capacity.

Nothing about your day-to-day life changes. You still buy, sell, spend and borrow. For income tax purposes a revocable trust is ignored — you keep using your own Social Security number and file the same return.

Why people use one

• Probate avoidance: property titled in the trust passes under the trust, not through the probate court, so there is no public filing, no waiting period, and usually far lower cost.
• Incapacity planning: if you cannot manage your affairs, your successor trustee steps in immediately without a court guardianship or conservatorship.
• Privacy: a will becomes a public record when it is filed. A trust normally does not.
• Out-of-state property: real estate in another state would otherwise need its own probate there.
• Control over timing: you can hold a young beneficiary's share until an age you choose instead of handing over a lump sum at eighteen.

What it does not do

A revocable trust does not reduce your income taxes, does not protect assets from your own creditors, and does not by itself reduce federal estate tax. It also does nothing at all for property you never transferred into it — which is why funding matters more than the document.