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What is a revocable living trust?

A revocable living trust is a legal document that gives someone the authority to make decisions about someone else’s money or property that’s held in a trust.

People set up a revocable living trust in order to give someone else the power to make financial decisions on their behalf, in the event they become unable to because of injury or illness. People also often use trusts to retain control of their property and to designate who will receive money and property once they die. They can also avoid going through the probate court system.

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. In general, during the life of the grantor, the grantor is their own 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 but can only act if a trustee can no longer fulfill their role. A trustee is also a fiduciary.
  • The 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 they are alive, or they may name co-beneficiaries (e.g. the grantor and their spouse) who receive some money or property from the revocable living trust before they die. The people who receive money or benefits from the revocable living trust after the person dies are called residuary beneficiaries.

The trustee has authority only over property once it’s transferred to the revocable living trust and only after the grantor has lost the capacity to manage their property. A living trust is ineffective unless the person, who makes the trust, puts her money or property into it.

When you’re acting as a trustee, you will have the legal authority to spend and invest the money and property in the revocable living trust for the benefit of the grantor and any other beneficiaries. You don’t, however, have legal authority over any money or property that’s not in the trust.

For more information on trusts, read our guide for trustees on managing someone else’s money .