This guide contains a description of the main sections of our revocable living trust. Note that some of the sections are optional depending on how you answer our questionnaire.
The first section identifies the grantor. If applicable, it will also state that the grantor will act as the initial trustee.
This section identifies the official name of the trust. Use this name when referring to the trust in other documents and when transferring assets to the trust.
The next section explains that the general trust's purpose is to receive and manage assets during the grantor’s lifetime and to distribute those assets according to the grantor’s wishes upon death. Carrying out the grantor’s wishes is the primary purpose of the trust, and any successor trustee must act accordingly when managing the trust.
The grantor will fund the trust by transferring assets to the trust at the time of creating it or any time thereafter. The grantor may also remove trust assets at any time while living.
The grantor can change or terminate the trust at any time during his or her lifetime.
The grantor may make additions or withdrawals from the trust at any time.
When the grantor dies, the trust becomes irrevocable. This means that at that time, it may not be amended or altered.
By law, when the grantor dies, the trustee will first need to pay all legally enforceable debts, expenses, and taxes owed by the grantor before the trust assets may be distributed to beneficiaries.
This section identifies the initial trustees and any successor trustees appointed by the grantor to manage the trust. A trustee may resign by providing 30 days' notice to the next successor trustee.
The grantor may remove an appointed trustee at any time during the grantor’s lifetime by notifying that trustee, and the grantor may appoint additional or replacement trustees at any time.
This section explains whether or not the trustees are required to post a bond. A bond is insurance to protect the trust in the event that the trustee acts dishonestly or imprudently with trust property. Payment for the bond is usually a small fee relative to the size of the trust and comes out of the trust property.
If the grantor only wants specific appointed trustees to serve with a bond, then you can manually add this language by downloading and changing the Word document version of your completed trust from our site.
If an appointed trustee is an individual, then he or she is not entitled to compensation for acting as the trustee under the terms of this section. However, if a trustee is a professional trustee service or business entity, then the trustee will be entitled to the customary and reasonable compensation in rendering such services.
The trustee will not be liable for any improper actions taken so long as those actions are taken in good faith when carrying out his or her duties.
When transacting business on behalf of the trust, the trustee may use the following format when identifying the trust: John Doe, as Trustee of The [Grantor’s name] Revocable Living Trust, dated month day, year. The trustee has all the rights and powers available under state law to carry out the grantor’s wishes, including, but not limited to, the following:
Note, however, that the trustee may ONLY use such powers if they help carry out the grantor’s wishes.
After the grantor’s death, the trustee is required to provide semi-annual accounting to adult beneficiaries detailing relevant transactions and dealings of the trust funds.
If you choose the option to include trust funds specifically for the grantor’s spouse, then this section is included and details the terms of the spousal trust fund. The property set aside for the spouse is identified on the schedule titled “Spousal Subtrust Property” attached at the end of the document.
After the grantor’s death, the trustee will maintain such funds and make periodic disbursements to the spouse as the trustee considers appropriate for the spouse's care, protection, health, education, maintenance, and support, taking into account the spouse’s accustomed manner of living.
If the spouse does not survive the grantor, then the funds set aside for the spouse will be put into the general trust fund and go to the general trust beneficiaries that the grantor designated.
Note that before the grantor’s death, the grantor may still use the trust funds for spousal support since the grantor still hascontrol over the trust.
If you choose the option to include trust funds specifically for the grantor’s children, then this section details the terms of such trust funds. First, this section identifies the children that are eligible to receive trust funds. If you choose the relevant option, any after-born or after-adopted children are also included. The property set aside for the children is identified on the schedule titled “Child Subtrust Property” attached at the end of the document.
After the grantor’s death, the trustee will maintain the funds and make periodic disbursements to the children as the trustee considers appropriate for their care, protection, health, education, maintenance, and support, taking into account their accustomed manner of living.
If you select the relevant option, then this section also specifies the age that each child will stop receiving payments. In this case, the child will receive the rest of his or her equal share upon reaching the specified age. If you do not select this option, then the children will continue to receive payments until the trust fund is completely diminished.
If a child dies before receiving his or her full share, then that child’s share will go to his or her living descendants; if no descendants exist, then the share will go to the grantor’s living descendants.
Note that before the grantor’s death, the grantor may still use trust funds for supporting the children since the grantor still has control over the trust.
As to any minor beneficiaries under the trust—including the grantor’s children, if any—the trustee has discretion as to whether or not to make payments directly to the minor, to make payments to the minor’s legal guardian or caretaker, or to withhold payments and invest the funds until the child is no longer a minor.
If you choose to include this option, this section identifies a caregiver to receive and care for the grantor’s pets upon the grantor’s death. It also names an alternative caregiver in case the first is unable to serve. You also have the option to provide trust funds for the caregiver to use in supporting the pets. Lastly, this section identifies the pets involved and provides any other instructions you choose to include.
This section lists any specific gifts from the trust property that the grantor wants distributed upon his or her death. Each gift names a beneficiary to receive it. If you name co-beneficiaries, then they will divide the property equally. Also, this section names alternative beneficiaries to receive the gift in case the first-choice beneficiaries do not outlive the grantor. These assets are also listed under the general trust property.
This important section names the beneficiary that will receive any remaining trust property after any and all specific gifts, spousal trust funds, and child trust funds are accounted for. Think of this as a catch-all clause that tells the trustee what to do with any leftover property. Typically, this property is left to the grantor’s spouse and then any children as alternative co-beneficiaries. Other common beneficiaries are close family and friends or favorite charities.
If you choose to include this option, then this section identifies any specific persons who are intentionally not named as beneficiaries to receive anything under the trust. It is important to list any people that may try to make a claim against the grantor’s property to whom the grantor specifically does not want to give anything. Common candidates are estranged family members and ex-spouses.
The trustee is prohibited from making a disbursement that will disqualify a beneficiary from eligibility for government benefits and entitlement programs unless it is in the best interests of the beneficiary to do so. Still, the trustee cannot be held responsible if a beneficiary fails to maintain eligibility due to receiving a disbursement under the trust.
If the grantor is also the initial trustee and the grantor becomes incapacitated, then the next successor trustee will become trustee. Here, the term "incapacitated" means the inability to make informed decisions because of advanced age, illness, or other causes.
Basically, the grantor needs to have this minimum level of understanding in order to continue acting as trustee. If the grantor is able to regain capacity at a later time, then the grantor’s status as trustee will return.
The grantor’s healthcare agent under the healthcare power of attorney will make the decision as to whether the grantor is incapacitated, along with a concurring opinion of at least one physician. If no healthcare agent is available, then the person you name in this section will make this decision.
A beneficiary is required to survive the grantor by at least 30 days in order to receive property under the trust. If there is no surviving beneficiary to receive a gift, then that gift will go to the beneficiary’s lineal descendants.
If the value of the remaining trust property is insufficient to fund a gift, then the trustee will have absolute authority to determine which of the remaining gifts listed under the trust will be distributed. However, remember that the trustee must always seek to carry out the grantor’s wishes; therefore, the trustee will take any known preferences of the grantor into account when making this determination.
If the value of the trust property becomes diminished to the point that only insignificant sums of money remain, then the trustee has the power to distribute all the remaining funds. This helps avoid any ongoing fees against the trust property.
This language helps to avoid duplicate fees against the trust that may occur in the event that two separate trust funds end up benefiting the same beneficiary. In such a scenario, the trustee is authorized to merge the separate funds together to make things simpler.
Just as the trustee may merge two trusts together, the trustee also has the power to split one trust into two separate trusts. In this case, the trustee may split a trust if, under the circumstances, the trustee deems it advisable. For instance, this could occur if one co-beneficiary of a trust becomes disabled and it would be easier for the trustee to create a separate special needs trust for that beneficiary.
The grantor reserves the right to sell, assign, or gift any insurance policies held under the trust in any manner the grantor wishes, even if such actions contradict the terms of this trust. The trustee will use his or her best efforts to collect any sums due under an insurance policy, but will not be required to institute legal proceedings to collect such sums unless the trustee is indemnified against liability.
This provision prevents creditors from making a claim against a gift before that gift is actually distributed to its beneficiary.
A gift that is given to a beneficiary during the grantor’s lifetime that is the same as a gift going to the beneficiary under the trust will satisfy the terms of the trust, and, therefore, that beneficiary will not receive the same gift twice.
If the grantor’s main residence is held in the trust, then the grantor has the right to still occupy and use the residence rent free during their lifetime. This right helps to ensure that the grantor will not lose eligibility for any state homestead tax exemptions that he or she may qualify for.
A trustee with a conflict of interest may still transact business with the trust and continue serving as trustee so long as the trustee acts in good faith, with reasonable care, and on terms comparable to those that may be obtained from third parties when transacting business related to the trust.
The trustee will not be responsible for good faith errors made when making distributions to beneficiaries who no longer have the right to receive such distributions due to a change in circumstances for which the trustee does not receive notice—for example, a death, birth, marriage, or similar event. However, the trustee will still have to try to recover any such improper distributions.
The trustee may choose to move the trust to a new jurisdiction at any time. For instance, the trustee may move the trust to a different state, and that state’s laws will then govern the trust. This power may be exercised multiple times and will be final and binding on all individuals and entities involved.
Trustees may not be held responsible for any improper actions taken by a prior trustee.
A trustee may sign a certificate or abstract of trust before a notary public containing information describing aspects of this trust, and the certificate or abstract will serve as conclusive evidence of the facts it contains. Third parties transacting with the trust may therefore rely on such certificates or abstracts as accurate representations of trust information.
This section identifies the state law currently governing the trust.
Here, the grantor signs and dates where indicated to confirm that he or she has read the trust and approved of its terms.
Using a notary to witness the signing is optional but recommended, as it provides additional evidence of the authenticity of the trust should it ever be disputed.
This schedule lists all the assets that the grantor is transferring into the trust. The assets contained in any and all gifts, spousal trust funds, and child trust funds are also included here since those will be funded out of the general trust property.
Upon signing, the grantor will need to transfer the title of many of these assets into the name of the trust. The manner for changing the owner listed on an asset title or registration will depend on the type of asset. For instance, contact the banks holding your cash accounts for information on transferring those accounts. You will likely need to file a quit claim deed to transfer any real estate. If in doubt, contact the organization responsible for maintaining title or registration records for each asset.
For assets that do not have official title or registration documents, such as jewelry, art, hobby collections, and other personal items, then simply identifying the property here in your trust will suffice to transfer the property. However, to ensure that those physical items do not get lost, consider placing those items into a safe deposit box owned by the trust. If you do, be sure to let the trustees know where those items are being held and make a record of the relevant information.
This schedule lists all of the assets that the grantor is transferring into the spousal trust fund. These assets are also listed under the general trust property.
This schedule lists all of the assets that the grantor is transferring into the child trust fund. These assets are also listed under the general trust property.
As previously mentioned, the trust authorizes the trustees to create and sign a certificate of trust, also known as an abstract of trust. The purpose of a certificate of trust is to prove the existence of a trust without disclosing the private details of the trust. Most states have enacted laws that govern the use of certificates of trust, requiring third-party organizations to accept a certificate as long as it complies with state requirements.
Although there may be some slight variations depending upon state law, a certificate of trust normally comprises the following sections:
It is best practice that all trustees sign the certificate of trust and that the document is notarized.
A notice of assignment is used to officially evidence the transfer of property from a grantor to a trust. Some property, such as cars, houses, or shares, have titles that can be changed to show new ownership; however, other items, such as art, jewelry, or antiques, do not, even though their value can be high. The use of a notice of assignment officially witnesses the transfer of untitled property to avoid doubt and lower the possibility of any future conflict. A notice of assignment is not required in every state; however, it is advisable to complete the notice. The document should list all the property being added to the trust and should be signed and notarized. In the event that any untitled property is added to the trust at a later date, a new notice of assignment should be made for that property.
Yes. The property that has been lodged into the trust will avoid probate. Due to the fact that the trust continues to exist after the grantor’s death, all trust assets will be transferred from the grantor to the successor trustee. Be aware that any assets being transferred into the trust through a pour-over will will have to go through probate.
Yes, you still need a last will and testament. If you create a joint revocable living trust, then each grantor still needs a separate will. Even though a revocable living trust is an important estate planning document, it does not replace a will. Firstly, a living trust will never include all the property you own. In the event of your death, you will need a way to transfer any assets not placed into the living trust to your desired beneficiaries. This is accomplished by using a special type of will called a pour-over will. Secondly, if you have children or other dependents, a living trust does not enable you to name guardians. Lastly, in a will you also have the opportunity to express your burial wishes.
During the grantor's lifetime, it does not. If the living trust is revocable, for tax purposes the grantor is still considered the owner of all assets lodged into the trust and remains liable for any taxes owed. In the event that a Tax Identification Number or an Employer Identification Number (TIN or EIN) is asked for, the grantor's own Social Security Number (SSN) can be used. It is possible to get a separate TIN or EIN for the living trust, but it is not necessary.
Yes, you can. A revocable living trust gives you the power to add and remove property at any time. By following the same procedure used to fund a living trust, you are able to add property. The appendix that lists trust property will also need to be amended and notarized. Before adding property, it is recommended that you check your living trust to ensure that it still meets your needs and reflects your wishes.
Revocable living trusts are usually established during the estate planning process. There are many different reasons to create this type of trust. Some of the most common reasons and benefits include the following:
Any natural person and any organization can be named as a trust beneficiary.
In the case of a beneficiary who is a minor, the trust can include provisions designed to govern distributions and provide some structure and control over the assets until the minor beneficiary reaches a pre-determined age (or ages).
In most states, it is not legal to name a pet as a beneficiary in a revocable living trust.
A revocable living trust created in one state, as long as it was valid when created in that state, should be legal and enforceable in any other state. However, there are some nuances to the way state law treats certain trust provisions.
It may be advantageous and advisable in some circumstances to amend a previously created trust to refer to the new state’s laws rather than the original state’s laws.
Unlike a last will and testament, which is specific to individual people, you can create either separate revocable living trusts or a joint revocable living trust with someone else.
If most of the assets that you will be using to fund the trust are owned jointly with another person and if your distribution wishes are the same, then regardless of who dies first, using a joint revocable living trust may make the most sense. With a joint revocable living trust, both parties normally serve as grantors and as co-trustees.
Establishing a revocable living trust agreement is just the first step in creating your trust. In order to make your new trust legal, you will need to put assets into it. This process is referred to as “funding” the trust.
You can put a wide variety of assets into a trust. The following assets are some of the most commonly used to fund a trust:
Other assets that can be placed into or directed toward a revocable living trust include contracts for deed or mortgages where someone else is paying you. An “assignment of interest” can also be used to transfer household goods and other assets into your new trust.
If you are unable to serve as a trustee of your own trust because of incapacity, your trust agreement should identify one or more successor trustees. If you are married, it is common to give your spouse the power to serve in your stead.
As you are entrusting your trustee with a great deal of power, it is important that you choose a person or organization that you believe will act responsibly, professionally, and in accordance with your wishes.
Your trustee holds a fiduciary responsibility over trust assets and is charged with carrying out your wishes as identified and authorized in the trust agreement. This means that he or she (or a corporate trustee) must avoid conflicts of interest and exercise good judgment in carrying out his or her responsibilities.
Specifically, the trustee of a revocable living trust is usually responsible for managing, investing, selling, transferring, re-titling, and taking any other necessary actions with your trust assets, in accordance with the trust agreement.
The trustee may also be responsible for providing trust accountings, including providing a final account of all assets and liabilities.
Any competent adult can be a trustee of your revocable living trust. You can also name a professional fiduciary by contacting a trust department of a bank or credit union.
Most people who create revocable living trusts choose to serve as their own trustees until their incapacity or death. Your trust agreement should identify who will serve as a trustee if you are unable to do so.
A revocable living trust and a last will and testament are common estate planning tools designed to help people exert control over the way their estate will be administered at death.
Unlike a last will and testament, which is generally structured so that estate assets are fully distributed as soon as practicable, a revocable living trust can “live” for years after the death of the grantor who created the trust.
When you create a will, your assets remain in your name until after your death, when they become assets of your estate. With revocable living trusts, the grantor can choose to “fund” the trust during his or her lifetime, transferring ownership of assets from his or her name as an individual to his or her name as a trustee. Retitling assets into the name of the trust helps ensure smooth trust administration and distribution.
Trust law is state specific, so the formalities to create a valid revocable living trust may vary from state to state.
In every jurisdiction, the person creating the trust (the “grantor”) must be at least 18 years old and must have the mental capacity to understand his or her actions at the time the trust agreement is signed.
Some states require that the grantor’s signature be witnessed and/or notarized when the document is signed.
No. There is no need to file your trust agreement with your state or local government. However, when you are acting as trustee and transacting business with financial institutions or others, you may be asked to provide a photocopy of part or all of the trust agreement.
As a best practice, keep your original, signed revocable living trust agreement in a safe place with your other legal papers and documents. Many people also choose to distribute copies to their lawyer, spouse, and beneficiaries.
While creating, funding, and maintaining a revocable living trust is a common way of trying to avoid the need for an estate to go through a probate court proceeding, there are also other ways of avoiding probate court.
Assets that you own jointly with others with rights of survivorship and assets for which you have one or more named beneficiaries on file will pass outside of probate court. For certain estates, naming beneficiaries or adding joint owners on title documentation is sufficient to make those assets avoid probate court without the need of a revocable living trust.
A revocable living trust, also called an “inter vivos trust,” is “living” because it exists and can be used during your lifetime. As soon as your trust agreement has been validly executed, you can begin adding and removing assets from the trust. When you pass away, remaining trust assets are managed and distributed according to the terms you provided in the trust agreement.
In contrast, when someone establishes a testamentary trust through their last will and testament, they do not actually have a trust until they die and certain conditions of the will are met, if applicable. For example, a will for a young mother could include a testamentary trust provision that says a trust for her minor children will come into effect if her spouse or partner does not survive her. If her spouse or partner does survive her, the trust will never be created or funded. If, however, she outlives her spouse or partner, the will includes all of the framework and provisions needed to establish and manage the trust’s distribution of assets as provided in the will.
Revocable living trusts are sometimes used to provide a framework around state and federal estate taxes, if applicable. Using trust instruments is not a way to eliminate the taxes your estate might owe; however, it can provide a structure for leveraging state-specific marital and charitable deductions.
For people who believe their estate may be subject to estate taxes, revocable living trusts can include provisions addressing how the taxes due will be apportioned against trust and estate assets.
Due to the flexible nature of revocable living trusts that allows the grantor to move assets into and out of the trust at any point and to revoke the trust entirely, there is no protection for your current or future assets.
Trusts often include “spendthrift provisions” designed to protect assets inside the trust from beneficiaries’ creditors. While specific protections will vary depending on the terms of the trust, spendthrift provisions may be most useful when your trust provides for long-term management and trustee discretionary distributions for beneficiaries, rather than outright distributions.
It is important that you thoroughly review your document prior to signing it. You may make textual edits by downloading the document in .docx format and opening it in Microsoft Word or Google Docs.
In order for your revocable living trust to be executed properly, you must sign it in front of a notary public.
Included with your living trust is a Notice of Assignment and a Certificate of Trust. The Notice of Assignment is used to evidence the transfer of any property you listed that is untitled—as in, without official title paperwork—into the trust. In some states, like New York, this is required, whereas in other states this is simply a recommended formality. If making a joint living trust, both grantors will need to complete the form. The Certificate of Trust is used to show a financial institution or other organization that you have created a trust while keeping the rest of the information in your trust document private. It will need to be completed by hand and then notarized. It is best to make multiple copies.
Transferring property into your trust is crucial. Without doing this, your trust will not be properly funded and your property will remain outside of the trust. All untitled property will be handled by the Notice of Assignment. Any property that has a title should be transferred to the trustee to hold in the name of the trust. This includes stocks, bonds, real estate, and bank accounts. A common format for the transfer language is "Joe Smith, as trustee of Joe Smith Revocable Living Trust u/a/d [DATE]." You may use the Certificate of Trust as evidence of the trust's existence.
Give a copy of your completed living trust document to your successor trustee; this will make it easier for the trustee to take control when the time comes. It may also be good to compile all relevant information about trust property and beneficiaries for your trust bundle.
At this point the hard work is done! It is important to review your living trust from time to time to ensure everything still reflects your circumstances. Do not forget that you can continually add and remove property from your trust.