What is a revocable living trust?

A trust is a legal entity set up by a “trustmaker” (sometimes referred to as a grantor or settler).  Within the trust document, the trustmaker designates a “trustee” to hold and manage assets on behalf of certain beneficiaries specified within the trust document.  A revocable living trust is one that an individual sets up during their lifetime, typically naming him or herself as the initial trustee, with instructions about how the assets owned by the trust are to be managed during his or her  lifetime and upon death.

Here’s another way of thinking about:  Imagine you set up a box and you put everything you own—bank accounts, real estate, investments, etc. into that box.  Attached to the box is a very detailed set of instructions written it by you.  It specifies who will manage the assets within the box (typically you, but you’ve also named successors in the event of your disability or death) and who can benefit from the assets in the box—i.e., who can we spend on?  So, for example, if you are married with young children, your trust might specify that while you are living, the trust assets can be used to take care of you, your spouse and your children.  The trust would also specify how you want your assets managed and distributed upon your death.

The term “revocable” indicates that as the trustmaker you retained the rights to amend the terms of the trust or revoke it entirely.  You also have the right to add or remove property from the trust at any time.