Revocable living trust: what it does, and the step most people skip

A revocable living trust is a document in which you (the grantor) transfer your assets to a trust that you control, serve as trustee of, and can amend or revoke at any time. On your death, the successor trustee you named distributes the trust property to your beneficiaries without probate. The catch is in one word: transfer. A trust controls only the property actually retitled into its name, and an unfunded trust changes nothing at all.

What it does — and does not do

It does: avoid probate for the assets it holds, keep the distribution private (a will becomes a public record; a trust generally does not), let a successor trustee take over immediately if you become incapacitated, and handle property in more than one state without a second probate.

It does not: save income tax or estate tax — a revocable trust is a grantor trust, income is reported on your own return; protect assets from your creditors, precisely because you retain control; replace a will; or cover retirement accounts and life insurance, which pass by beneficiary designation.

That last pair of points is where most disappointment comes from. A living trust is a transfer mechanism, not a tax or asset-protection tool.

What the document must contain

1. Creation and name — the trust's formal name and the date, used on every account you retitle.
2. Revocation and amendment — your reserved right to change or end it while competent.
3. Rights during your lifetime — you keep full use and enjoyment of the property.
4. Incapacity — how incapacity is determined (commonly two physicians' certificates) and what the successor trustee may then do.
5. Trustees — you now, then a successor trustee, then an alternate. Naming only one successor is the most common structural gap.
6. Distribution on death — beneficiaries, shares totalling 100%, what happens if one dies before you (per stirpes to their descendants, or proportionally to the survivors).
7. Trustee powers — sell, invest, borrow, employ advisers, distribute in cash or in kind.
8. Spendthrift clause — protects a beneficiary's share from their creditors before distribution.
9. Schedule A — the list of trust property.

Funding: the step that decides everything

Listing an asset on Schedule A is a statement of intent. Retitling is the transfer. Concretely:

• Bank and brokerage accounts — ask each institution to retitle the account into the trust's name. Most will want a certificate (or abstract) of trust rather than the full document, which conveniently spares you showing a bank clerk your beneficiaries.
• Real estate — a new deed must be prepared and recorded with the county recorder. Check first how it interacts with your mortgage, title insurance, and any homestead or property-tax exemption.
• Vehicles, business interests, valuables — each has its own retitling or assignment route.
• Retirement accounts and life insurance — do not transfer these into the trust. They pass by beneficiary designation, and naming a trust as beneficiary of an IRA has tax consequences worth advice.

An unfunded trust is the classic failure: the family finds a beautifully drafted document, and every asset still goes through probate because nothing was ever moved.

You still need a will

A pour-over will catches whatever you never transferred — the account opened last year, the car bought last month — and directs it into the trust. Without one, forgotten assets pass under your state's intestacy rules, which may be nothing like your trust.

If you have minor children, the will is also where you nominate a guardian. A trust cannot do that.

Choosing a successor trustee

They will handle money for people who may be grieving, so weigh reliability over seniority: someone organised, financially literate, likely to outlive you, and willing to serve — ask them first. Name an alternate. Consider whether co-trustees must act jointly (safer, slower) or may act alone (faster, less checked). A professional or corporate trustee costs money but removes family conflict from the equation.

Two situations that need an attorney

Louisiana. A civil-law state with its own Trust Code and forced-heirship rules that can override the distribution you choose.

Community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin). Moving community property into an individual trust, or mixing community and separate property, can change how it is characterised and taxed — including the basis step-up available to a surviving spouse.

Also worth professional advice: taxable estates, blended families, a beneficiary with disabilities (a special-needs trust is a different instrument), or property abroad.

Create the trust

Our template produces a declaration of trust with the retained powers, incapacity provisions, successor and alternate trustees, specific gifts, beneficiary shares with per stirpes or proportional substitution, staggered distributions for young beneficiaries, a spendthrift clause, the notary block, Schedule A and a funding checklist — with checks that flag shares not totalling 100%, a missing successor trustee, an outright gift to a minor, an omitted spouse, community property states and Louisiana.

→ Revocable Living Trust

And the companion document: Last Will and Testament.

Related: living trust vs will · how to fund a living trust.