What is a revocable trust?
A revocable trust, also commonly referred to as a living trust or trust agreement, is a document that explains how your assets should be managed during your lifetime and after your death. The creator of this document, which is usually you, is known as the “grantor” or “settlor.” The trust is “revocable” because you may modify or terminate the trust agreement at any time during your lifetime, provided you are not incapacitated. “Irrevocable” trusts are sometimes used, but for very specific purposes. Revocable trusts are more common for traditional estate planning.
Your assets (bank accounts, property, and investments) must be formally transferred to the trust in a process known as funding your trust. However, before transferring assets to your trust, ensure that there will not be any unintended tax consequences. If your trust is not funded properly, your assets may still pass through probate.