A revocable trust is also known as a living trust. Florida Statute Section 736, Part VI, governs revocable trusts. A trust is revocable unless the trust instrument specifically states the trust is irrevocable. Revocable trusts may be amended, revoked, or terminated by the settlor during their lifetime. Once the settlor dies, the revocable trust becomes irrevocable and can no longer be modified.
The creator of a trust is known as the settlor. The settlor has the power to create and initiate the trust, name the trust property, establish its terms, name trustees, identify beneficiaries, change, or dissolve the trust.
A trustee has the power to enforce the trust’s terms in the best interest of its beneficiaries. A beneficiary is a person or entity that has an interest in trust property.
The settlor may also be the trustee and the beneficiary. If the settlor is also the trustee, a successor trustee must be named.
A revocable trust can be created by more than one settlor. In such a case, the trust may be revoked or amended by either the settlor for the portion of the trust property attributable to that settlor’s contribution.
Trust property may include real estate, investments, or bank accounts.
The main advantage of a revocable trust is that it allows the settlor to maintain control and flexibility of the trust’s assets during the settlor’s lifetime. Other advantages of a revocable trust include the ability to modify its terms, revoke the trust at any time, change or remove the trustee or its beneficiaries, transfer assets in and out of the trust, reclaim property or spend funds from the trust, plan for the settlor’s incapacitation, and avoid probate.
Avoiding probate will maintain the privacy of the trust’s assets, as well as avoid a lengthy and costly court process.
The disadvantage of a revocable trust is that it provides minimal asset protection qualities. The assets are available to creditors, debt collectors, and plaintiffs in a lawsuit.
Additionally, revocable trusts generally do not provide tax benefits and are still subject to state and federal taxes upon the settlor’s death.
For those looking for maximum control over one’s assets during their lifetime, a revocable trust is a preferred vehicle. An irrevocable trust offers better asset protection and tax benefits, but reduced control over the trust assets by its creator or settlor.