Next video:
Loading the player...

A revocable trust is a legal arrangement whereby a grantor transfers property to a trustee who holds the property in trust for the grantor’s benefit.  Under the terms of the trust, the grantor may amend or even terminate the trust up until his death.  Most often, the grantor is also the beneficiary of the trust, as well as the trustee. During the life of the trust, the beneficiary receives income from the trust assets.

Revocable trusts are also known as “living trusts”, “loving trusts” and inter-vivos-trusts”. 

There are a number of reasons why someone might use a revocable trust.  Often it is the practical purpose of making provisions for the administration of assets and investments should the owner become unable to do so.  This provides assurance to the grantor that the person he hand selects as trustee will be the one managing his assets if he can’t.

Another reason people use a revocable trust is for privacy.  Under the terms of a revocable trust, when the original beneficiary dies, the trust assets are distributed to secondary beneficiaries in much the same way they would be under a will.  The benefit of the revocable trust is that the trust assets do not go through probate courts where they become a matter of public record.

Revocable trusts are not an estate tax planning tool because, due to the control element retained by the grantor, the trust assets are still included in the grantor’s taxable estate.

Related Articles
  1. Financial Advisor

    When to Trust a Revocable Trust

    Unsure of how your assets will be dispersed once you're gone? Here's how setting up a revocable trust while you're here can be a big benefit.
  2. Financial Advisor

    Irrevocable Trusts: New Trends You Need to Know

    Several improvements and additional provisions have been added to irrevocable trusts in recent years making them considerably more versatile than before.
  3. Investing

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  4. Investing

    An Introduction To Exchange-Traded Grantor Trusts

    These funds offer a very hands-off experience for the low-involvement investor.
  5. Managing Wealth

    How To Set Up A Trust Fund If You’re Not Rich

    Contrary to popular opinion, trust funds are not just for the rich. Middle class citizens can set them up, as well.
  6. Investing

    A Look Into Creating a Trust Fund With ETFs (VCIT, SDIV)

    Learn the basics of how a trust works and the two most common types. Discover how to use ETFs to fund a trust and the different strategies.
  7. Retirement

    Estate Planning for Beginners: Part Three

    A primary purpose of most trusts is to provide a timetable for the distributions of assets where an outright distribution may not be warranted.
  8. Managing Wealth

    What's a Trust Fund?

    A trust fund is a fund comprised of a variety of assets, established by a grantor, to provide financial security to an individual, most often a child or grandchild - or organizations, such as ...
Hot Definitions
  1. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  2. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  3. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  4. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  5. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  6. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
Trading Center