What is a revocable living trust?
A revocable living trust is a legal document that gives you the authority to make decisions about someone else’s money or property being held in a trust. Someone you know may set up a revocable living trust and give you the power to make financial decisions about money in the trust in the event that she becomes unable to make financial decisions on her own due to injury or illness.
The revocable living trust also says who will get the money or property in the trust once the person who creates the trust dies.
There are three roles under a revocable living trust:
- The person who makes the trust. They might be called the settlor, grantor, or trustor.
- The person who makes decisions about the money or property in the revocable living trust. They are called the trustee. A trustee can be an individual or a financial institution. If there is more than one, they are co-trustees. A successor trustee may also be named and acts only if a trustee can no longer fulfill that role. The person who makes the revocable living trust can name herself as trustee and you as co-trustee immediately, or you may be a successor trustee who can act when she can no longer make decisions. As a trustee, you are a fiduciary.
- A person or people who receive money or property from the revocable living trust. They are called beneficiaries. The person who makes the revocable living trust may be the only beneficiary while she is alive, or she may name co-beneficiaries who receive some money or property from the revocable living trust before she dies. The people who receive money or benefits from the revocable living trust after the person dies are called residuary beneficiaries.
For more information on trusts, read this guide on managing someone else’s money.