What is a Revocable Living Trust?

A trust is an agreement that determines how a person's property is to be managed and distributed during his or her lifetime and also upon death.   A lot of people use it for estate planning purposes.

A revocable living trust normally involves three parties:

The Settlor – Also called grantor or trustor, this is the party who creates the trust and puts property into the trust. More than one party can be the settlors of a trust, such as when a husband and wife join together to create a family trust.

The Trustee – This is the party who manages the trust property according to the terms of the trust. The settlor often serves as trustee, but another person or a trust company can be named to serve as trustee.

The Beneficiary – This is the party that will receive the benefits derived from the trust. This can be the settlor or anyone else the settlor names as beneficiary.  There can be more than one beneficiary in a trust, as spelled out by the trust documents.

A trust is classified as a "living" trust when it is established during the settlor's lifetime and as a "revocable" trust when the settlor has reserved the right to amend or revoke the trust during his or her lifetime.

A trust is created by the Trust Agreement.  This is a special document that specifies the duties of the trustee, how the proceeds and expenses of the property will be handled, what happens if a beneficiary dies, etc.  A deed is then prepared to transfer the ownership (title) from the Settlor to the Trust.  The Trustee will then manage the property as instructed in the Trust Agreement.

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