A revocable trust is a trust that is funded with assets and that can be amended and revoked by the person creating the trust. An non-revocable trust is also funded with assets but cannot be amended by the person creating it. The person creating the trust, often called the settlor or the grantor typically retains all of the benefits to the property placed into the trust. The terms of a trust are established in a written agreement signed by the grantor and the trustee. It can be funded with bank accounts, stocks, bonds, a home and other assets. The terms of the trust should provide for the disposition of the property in the trust both during the life and following the death of the grantor.
A common goal is to avoid probate. Assets within the trust will generally not be subject to the jurisdiction of the probate court, either while the grantor is living or following the grantor’s death. Assets owned by an individual’s name and not contractually payable on death will generally be subject to probate.
A common misconception that estate tax savings can be achieved with a trust, but not with a will. While the use of a trust will avoid probate proceedings, avoiding probate does not mean avoiding estate taxes. The assets of a trust are part of a person’s gross estate for estate tax purposes just the same as probate assets.
Terms of a trust are contained in a private document while the terms of a will become a matter of public record. A trust allows control of the trustee. Costs such as probate court costs, appraiser’s fees, attorney fees, etc. are all costs may be avoided with a trust. Assets to be transferred through a trust can be transferred in accordance with the instructions in the trust over instructions from the probate court.