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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.

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