Revocable living trust: A trust that can be revoked or canceled at any time by the settlor. As a living trust, it was setup during the lifetime of the settlor.

A Revocable Living Trust will avoid probate when:

  • It is properly drafted; and,
  • It is properly funded (asset’s title documents are placed under the trust)

The benefits from avoiding probate are significant, both in regards to cost and effort.

Tax Considerations of a Revocable Living Trust

  • The estate planning benefits available in a revocable living trust are also available in a well-constructed will.
  • A revocable trust does not provide any income tax savings. For income tax purposes, the (grantor) trust is treated as if it does not exist. An income tax return is not required to be filed, though one often is as a ‘ghost return’ with no tax; the purpose is to just show the assets held by the trust. Any income or loss of the trust is included on the personal tax returns of the trustees.