Introduction to Estate Planning and Revocable Trusts  (Part II)

Complete Library of Estate Planning

The Nuts and Bolts of a Revocable Trust

So, you’ve heard about revocable trusts, but how do they actually function? Let’s break it down step-by-step.

First, you create the trust document with help from an estate planning attorney. This document outlines the rules: what assets go in, who manages them (the trustee), and who gets them later (the beneficiaries). For example, you might put your home, bank accounts, or investments into the trust.

Next, you “fund” the trust by transferring ownership of those assets into the trust’s name. If you’re the trustee, you still manage everything—paying bills, selling property, whatever’s needed—just as you did before. The key difference? The trust technically owns the assets, not you personally.

During your lifetime, you can tweak the trust anytime—add new assets, change beneficiaries, or dissolve it entirely. If you become incapacitated, a successor trustee (someone you’ve pre-selected) steps in to manage things without court intervention. And when you pass away, the trust becomes irrevocable, meaning it can’t be changed, and your successor trustee distributes the assets to your beneficiaries according to your instructions.

It’s like a will with superpowers: control now, peace of mind later. Next time, we’ll explore why so many people choose revocable trusts over other options.

Sources

• IRS – Estate Tax
• IRS – Gift Tax FAQs
• American Bar Association – Estate Planning Resources