The ABCs of RLTs - Part 1

You may have heard of a revocable living trust (RLT), which is a commonly used estate planning solution. But what exactly are they, who is affected by them, how can they be changed, and what do they accomplish? What Are They?

Trusts, which are legal entities that hold title to property for the benefit of a living person, are often used as an alternative or supplement to a will. A revocable living trust(sometimes called a revocable trust, an inter vivos trust, or a living trust) is a trust that you create during your lifetime and can change at any time prior to your incapacity or death.

RLTs are distinguishable from irrevocable living trusts, which are difficult to alter after their creation (though there are a few possible ways, for example, by making limited changes permitted by the terms of the trust, asking a court to order changes, or shifting the trust’s assets into a new trust).

Who Is Affected by Them?

The living person or charity benefited by the trust, but who does not have legal title to the money or property in the trust, is called a beneficiary. The individual who creates the trust decides how it will operate, and determines what property or funds to include in it is called the grantor (but may also be called the settlor or trustor). The trust is administered by a trustee, who is in charge of managing and investing the funds or property in the trust and distributing them to the trust beneficiary according to the grantor’s instructions, memorialized in a trust agreement.

Typically, the grantor names a successor trustee in the trust agreement who will manage the trust if the original trustee becomes incapacitated, passes away, or is otherwise unable to serve.

Often, though not always, the grantor of the RLT is both the initial trustee and primary beneficiary. So, you create the trust and provide the funds or property for it, you manage, invest and control the property and money owned by the trust, and you distribute the trust funds to yourself as desired. While the grantor is alive and well, the tax identification number of an RLT is the grantor’s social security number, and any income earned by the trust is taxed as the grantor’s personal income.

Want To Know More?
Navigating an RLT can be confusing, but we are here to help.  If you are concerned about protecting your assets, we can help you. Click here to email us or call us at 309-807-2885 for your FREE 15-minute consultation.