Revocable living trust
The previous four documents are essential as a starting point. This fifth document–a revocable living trust–is one that you may want to discuss with an attorney. It may be suitable for your situation, but in some cases, the attorney may suggest that it is not necessary.
If your attorney suggests creating such a trust, you can be your own trustee. You receive all of the income from the trust assets, and you have full access to the trust principal.
A revocable living trust can be altered at any point during your lifetime. You can change beneficiaries or discontinue the trust at your discretion.
At your death, this trust becomes irrevocable. The person you name as successor trustee will follow the instructions in the trust to manage the assets and liabilities and to distribute the assets in trust.
You should know that ongoing management affects only assets that you have retitled in the name of the trust. If your attorney suggests a revocable living trust, you will want to follow his or her instructions regarding retitling assets and accounts.
You still need a “pour-over” will to govern assets that are not titled in the name of the trust, and also to appoint guardians for minors.
Other advantages of a living trust are the successor trustee can manage the assets on your behalf if you become disabled or incapacitated during your lifetime. Assets in the trust then avoid the probate process upon death.
Since you maintain control of the assets within the trust, they remain part of your taxable estate. However, a revocable living trust can also include provisions to help reduce estate taxes after your death.