Living Trust vs Revocable Trust: More Than Just a Legal Form

Planning how your property passes to your family is essential. You want things to be simple for them later. As you look into options, you’ll likely see the terms “living trust” and “revocable trust.” These terms can seem confusing. Are they the same? Is there a difference?

Let’s make this clear. When people mention a living trust, they usually mean a revocable living trust. “Living trust” means you create it while you are alive. “Revocable” means you can change or cancel it. So, a revocable living trust is a trust you set up during your lifetime that you can modify.

You might also hear about “irrevocable” living trusts. You can establish these trusts during your lifetime, but once established, they typically become difficult to modify. Irrevocable trusts serve different purposes. Our focus here is on the type of trust created during life that you can change—the one commonly called a living trust. We are looking at living trust vs revocable trust by focusing on the features of this flexible tool.

What is a Trust, Simply Put?

Think of a trust as a legal container for your property. You, the person creating the trust (sometimes called the grantor), decide what property goes into it. You name someone to manage the property in the container—that’s the trustee. And you name the people who will benefit from the property—the beneficiaries.

The trustee holds legal title to the property but must manage it for the beneficiaries, following your written directions. In a living trust, you usually name yourself as the first trustee. This means you keep control over your property while you are alive and able.

The Flexibility of a Revocable Living Trust

The ability to change your living trust is what makes it a flexible tool for many people. What does “revocable” mean for you?

• You can make changes: Life changes. Families change, you buy or sell property, your wishes might change. A revocable living trust lets you update its terms whenever you need to. You can change beneficiaries, name a different successor trustee, or alter how property is given out.
• You stay in control: As the first trustee of your revocable living trust, you keep complete control. You can buy, sell, or use the trust property just like you did before you put it in the trust.
• You can end it: If your situation changes a lot, or you decide the trust isn’t right anymore, you can revoke (cancel) the trust entirely.

This ability to adapt your trust is a main benefit of this type of living trust.

Why Use a Living Trust (a.k.a. Revocable Trust)?

Now that we’ve clarified the living trust vs revocable trust connection, let’s consider why setting one up might be a good idea for you. This type of trust offers several significant advantages.

1. Avoids Probate

This is often the main reason people choose living trusts. Probate is the public court process after someone dies that deals with their will and distributes their property. It involves court time, can take many months or longer, and includes fees and costs that reduce the inheritance for your family.

In Texas, even with a will, probate involves court steps and can take time. If your situation is complicated or there are disagreements, it can take even longer and cost more.

When you properly transfer your property into your living trust, the trust, not you personally, becomes the owner upon your death. This approach means these assets usually do not go through the probate court. Your successor trustee, the person you chose to take over, can distribute the trust property directly to your beneficiaries according to the trust document. This method saves your family time, money, and stress.

2. Keeps Things Private

A will filed for probate becomes a public record. Anyone can see details about your property, debts, and who inherits what. A living trust is private. The terms of your trust and the particulars of your property distribution are not typically public. This step is important if you value keeping your financial matters confidential.

3. Plans for Incapacity

A living trust also helps if you cannot manage your money due to health issues. If your property is in the trust and you become incapacitated, your named successor trustee can step in and manage it without needing a court to appoint a guardian. This arrangement avoids a potentially costly and public court process and ensures your property is managed by someone you trust, as you directed.

4. Handles Property in Other States

If you own real estate in more than one state, your estate might need to go through a separate probate in each state. This practice is called ancillary probate and adds time and cost. By putting your out-of-state property into your living trust, you can avoid this extra step because the trust owns the property.

5. Provides for Children or Others Needing Help

A living trust lets you control how and when your beneficiaries receive their inheritance. For minor children, you can keep their share in the trust until they reach a certain age, providing instructions for their support and education. 

This option avoids court control over their inheritance. You can also set up the trust to manage property for beneficiaries who may need help handling money, providing for distributions over time, or for specific needs.

Setting Up Your Living Trust in Texas

Creating a living trust involves a few important steps. While some resources offer do-it-yourself options, working with an attorney familiar with Texas law helps ensure everything is done correctly for your specific needs.

1. Create the Trust Document: This legal document states the rules of your trust. It identifies you as the creator, your initial trustee (typically you), your successor trustee(s), and your beneficiaries and outlines the management and distribution of your property.
2. Sign the Document: You must sign the trust document according to legal requirements. Getting it notarized is a good idea, especially if real estate is involved, though it is not always legally required in Texas.
3. Fund the Trust: This step is vital and often missed. The trust only works for property you legally transfer into it. You must change the ownership title of your assets—like deeds for real estate, bank accounts, and investment accounts—from your name to the name of your trust. Any property not moved into the trust might still need probate.
4. Update Beneficiary Forms: For things like life insurance and retirement accounts, you typically don’t put the account itself into the trust. Instead, you name your living trust as the beneficiary. When the money is paid out, it goes into your trust and is handled according to your instructions, rather than going directly to an individual.

Managing Your Trust After Setup

Once your living trust is created and your property is in it, you don’t just forget about it.

• Manage Property: As trustee, you manage your property just as before. You can buy, sell, and use your assets.
• Keep it Current: Review your living trust every few years and after significant life changes (like marriage, divorce, new children, or changes in finances). You should update it to match your current wishes. Additionally, ensure that you transfer any new property into the trust to prevent probate.
• If You Become Unable or Pass Away: If you become incapacitated, your successor trustee manages the trust property for you as directed. When you pass away, your successor trustee distributes the property to your beneficiaries according to the trust terms, usually without court involvement.

Living Trust vs. Will: How They Differ

A living trust and a will are tools to plan who gets your property, but they work differently.

A will provides instructions on what should happen to your assets after you die. A will typically must go through the probate court to be carried out.

A living trust holds your property while you are alive and provides for its handling and distribution outside the probate court system.

Think of a will as telling the court what to do, while a living trust tells your chosen trustee what to do privately.

Most people with a living trust also need a “pour-over” will. This will is a backup that states any property not already in your trust when you die should be added (poured over) into your trust. This provision helps ensure all your property is handled under your trust’s plan. A will is also needed to name guardians for minor children, which a trust cannot do.

Is a Living Trust Right for You?

A living trust has many benefits, but it’s not the right choice for everyone. Consider a living trust if:

• You want to avoid the time, cost, and public nature of probate for your property.
• You own real estate in different states.
• You want a plan that designates someone to manage your money if you cannot do so, without requiring court action.
• You want to keep details about your property and who gets it private.
• You want control over how and when beneficiaries receive their inheritance, especially for minors or those needing help managing money.
• Your family situation is complex, and you have specific wishes for your property distribution.

Setting up a living trust usually costs more upfront than just writing a will because it involves more legal work and transferring property titles. However, avoiding probate later can save your estate significant time and money, especially for specific situations.

Conclusion

To wrap up the idea of living trust vs revocable trust: they are the same thing in everyday talk. You create a living trust during your lifetime, and most individuals opt for the revocable type to maintain control and make modifications. The main benefits are avoiding probate, keeping things private, planning for incapacity, and having flexible control over your property’s future. While it takes effort to set up and fund, a living trust can be a valuable part of your plan, giving you peace of mind and simplifying things for your loved ones.

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