The Revocable Living Trust is a legal agreement involving three parties: the trustee, beneficiary, and the trust–maker. The trust maker is also called a trustor, settlor, or grantor. Initially, all three parties are the same person. When the trustee and the trust–maker sign the agreement, the trust-maker is the one who funds the trust. According to the agreement, when the trust is funded and signed, the trustee distributes and manages the Revocable Living Trust’s assets to the beneficiary.
According to the agreement, if the trustee or the trust-maker become incapacitated, the successor trustee will manage and distribute the assets as per the instructions of the trust agreement. If the trustee, trust maker, or the beneficiary dies, the trust will become irrevocable.
The trust planning based on Revocable Living Trusts differs from one jurisdiction to another. The main benefit of this type of trust is avoidance of the Probate Court. The three disadvantages of the Probate Court are: cost, publicity, and delays. When creating a Revocable Living Trust for yourself, you should select one of your own successor trustees. You can appoint any family member, trusted friend, professional trustee, or a combination of the three. Ensure that the agreement follows the instructions of U.S. federal tax law. The trust must be carefully drafted and provide protection from this type of taxation.
The revocable trust recognizes three separate conditions of the grantor:
Alive and mentally competent: The first phase occurs when the agreement is signed and takes effect. The trustee has the right to manage the assets according to the trust agreement. The grantor has the authority to influence the control of how the assets are managed and distributed and may cancel the agreement at any time.
Mentally incompetent: The second condition of the trust is when the grantor becomes mentally incapacitated. A successor trustee will be chosen if the mentally incompetent grantor is also the trustee. The successor trustee will take over the management of the assets in the trust.
Grantor deceased: The third condition of the revocable trust takes place when the grantor dies and the taxes, bills, and debts of the grantor are paid by the successor trustee. After the liabilities are paid, the successor trustee will distribute the remaining assets among the beneficiaries.