Living Trust vs Revocable Trust Explained

Revocable Living Trust Living Trust vs Revocable Trust Explained

A Guide to Living Trust vs Revocable Trust

Estate planning terms can be confusing because different lawyers use different terms which can sometimes mean the same thing. Take for example three terms — living trust, revocable trust, and revocable living trust — which are used to signify only one thing. In this article, we will go through the differences between a living trust vs. revocable trust and how to draft one up without spending thousands of dollars.

What is a Living Trust?

A living trust is an estate planning tool that can be granted authority to own the grantor’s assets while they're still alive. As with all trust funds, a living trust also indicates how to distribute the asset once the grantor dies. Anything that has value can be moved into a living trust such as:

  • Real estate
  • Saving accounts
  • Automobiles
  • Fine art and jewelry
  • Intangible assets like mining rights and intellectual property
  • And many others 

Types of Living Trust

The main difference between a living trust and a revocable trust is that not all living trusts are revocable. Meanwhile, all revocable trusts are living trusts. If this has confused you, it’s because a revocable trust is a type of living trust. The two types of living trusts are listed below:

Revocable trustA living trust that can be amended or revoked at any time while the grantor is still alive.
Irrevocable trustAn irrevocable trust cannot be changed once the grantor has signed off on it. Revocable trusts automatically become irrevocable when the grantor dies and can offer tax advantages.

Family Trust vs Living Trust

To make things more confusing, another concept that you should understand is a family trust. A family trust is any trust that appoints family members as the beneficiary. This can be set up into manners:

  • Testamentary trust – This can be set up using a last will and testament which becomes active upon the grantor’s death and, later on, probate.
  • Living trust – This is set up and implemented while the grantor is still alive. The grantor may also appoint his or herself as trustee in managing the estate. When that happens,  the grantor appoints a successor trustee to carry through the estate management when he or she dies. This comes in two forms: revocable and irrevocable

Whichever form you take depends on your situation but the goal of creating a family trust as a living trust is to keep the wealth within the family and remove assets from the grantor’s ownership. This also provides them with control over the property while enjoying the right to receive benefits from the assets. 

Benefits of a Revocable Trust

A revocable living trust is an efficient way of distributing assets. It comes with a bevy of benefits that the grantor and the beneficiaries can both enjoy. These include:

  1. Revocable trusts are flexible enough that they allow you to make changes at your discretion. This can be helpful when circumstances change such as the birth of a child or divorce of couples. This can be invaluable for grantors who are uncertain about appointing beneficiaries. The flexibility that a revocable living trust offers is a popular option especially for those who are starting their estate planning early.
  2. A revocable trust can cover grantors during three important phases of their lives. If the grantor becomes incapacitated, the trustee has fiduciary duty to act in the grantor’s best interests and manage his or her estate. When the grantor passes away, the trustee automatically takes over. A revocable trust can also account for minor children's guardianship.
  3. With a will, the assets will have to go through probate. It is a court proceeding where the distribution of your assets is settled. A probate is a time-consuming process that can last months or years. If you own property in multiple states, the beneficiaries need to go through multiple probates. The costs of probate can also adversely reduce how much the beneficiaries can inherit. With a revocable living trust, there is no need to go through probate. The trustee automatically manages the distribution of the assets outside of a court order.
  4. Although setting up a will costs less than setting up a living trust, the latter offers protection from someone challenging the provisions. This is why in the long run, a revocable living trust means less hassle and costs.
  5. A will is a public record in which anyone can see the stipulation, the beneficiaries, and how much each beneficiary will inherit. In a living trust,  the assets are distributed in private ensuring the confidentiality of your estate and family members.
  6. The Federal Deposit Insurance Corporation’s (FDIC) coverage increases with revocable living trusts. The maximum insured amount is $1.25 million wherein each beneficiary is insured up to $250,000.

Get a Living Trust from DoNotPay in Minutes

The lawyer fees to set up a revocable living trust are between $1,000 to $2,000.  The amount increases when drafting a joint living trust. Meanwhile, there are living trust forms that you can get online — simply download and fill them out to draft a living trust.  However, you cannot be certain if the form’s language is legally accepted. That is where DoNotPay can help. We are the world's first robot lawyer and we have been helping users draft a technically accurate living trust without expensive fees. With DoNotPay, all you have to do is:

  1. Log-in to your account
  2. Go to the revocable living trust product
  3. Tell us your state of residence
  4. Assign your trustees and beneficiaries
  5. Allocate your properties and assets as desired

That's it! Your revocable living trust will be ready to review and sign!

DoNotPay can help you set up a living trust in these states:

ArizonaNorth CarolinaUtah
IllinoisMarylandSouth Carolina
Washington StateNew JerseyLouisiana
New YorkOklahoma

DoNotPay Can Help With...

Want your issue solved now?