A guide to revocable trusts & how they work

How a revocable trust can help your beneficiaries get their inheritance faster

Headshot of Elissa Suh


Elissa SuhSenior Editor & Disability Insurance ExpertElissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

Updated|8 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

As part of an estate plan, many people decide to write a will, a legal document that describes how your property and assets should be distributed once you die. In addition to a will, some people may decide to open a trust — a separate entity that holds the assets and has its own set of rules for distributing them. One common type of trust is a revocable trust, which is simply a trust that you can change or close. You create this type of trust while you’re alive, which is why it's commonly known as a living trust, revocable living trust, or occasionally called an inter vivos trust.

Revocable trusts are an important part of an estate plan because they have distinct advantages over wills in certain situations. If you think trusts are for the wealthy, think again; revocable trusts are fairly straightforward and give you flexibility and control over how your possessions are passed on after you die. Trust assets tend to avoid probate so chosen beneficiaries receive your property and possessions in a seamless transition after you pass away. Revocable trusts aren’t the best option for every situation, since they don’t offer advantages that other trusts may offer, like asset protection or tax advantages.

Key takeaways

  • A revocable trust, also called a living trust, can be revoked or changed until the grantor's death.

  • The grantor typically acts as trustee of a revocable trust during their lifetime.

  • Benefits of a living trust include avoiding probate and retaining control over assets, unlike with other trusts.

  • Revocable living trusts don't have the same protections and advantages as irrevocable trusts, which can’t be changed.

What is a revocable trust?

A trust is a legal arrangement in which you can place money and property so they can eventually be used by your future heirs. By definition, a revocable trust is a trust that can be revoked or modified. The terms of the trust are outlined in a trust document, which is just a legal document that states the rules and actually establishes the trust. (Check out three other essential estate planning documents.)

A strong estate plan starts with life insurance

Before we get into how a revocable living trust works, here is a refresher on how the roles of the people involved in a trust:

  • A grantor (also known as the trustor or settlor) creates the trust

  • A trustee maintains the trust

  • A beneficiary receives the assets in the trust

A living trust is created during the grantor’s lifetime. The grantor funds the trust by retitling assets (like a house) into it and names beneficiaries to one day receive them from the trust. Grantors can also name contingent beneficiaries in case the original beneficiaries are dead or unable to receive the assets.

The trustee oversees the trust by handling investments, paying taxes if necessary, and distributing money and assets to the beneficiaries, according to the trust agreement. Many grantors also choose to act as the original trustee of their revocable living trust, since it makes it easy to move assets in and out of the trust or make any changes. Once they pass away, the living trust becomes irrevocable, since a revocable trust cannot be changed without the consent of the grantor, and a successor trustee will take over. If you’re the trustee of your living trust, don’t forget to name a successor in the trust agreement.

→ Learn more about what a trustee does

What assets can be placed in a revocable trust?

A revocable trust can hold just about anything, including financial accounts, vehicles, real estate, copyrights, patents, and personal property, like an art collection.

→ Here are eight reasons why you should put your house in a trust

When you fund your revocable trust with money that pays out routinely to beneficiaries, you’ve effectively set up a trust fund.

If you create a trust with another person, like your spouse, you’ve got a joint trust. You can use the trust to hold jointly owned property or community property.

Wondering whether you need a trust or if a will is enough for your needs? Read about how living trusts and wills work together.

Benefits of a revocable living trust

Most people open a trust so that they can have greater control over how their assets are distributed to their beneficiaries. A trust also lets you stipulate how a future heir might use the asset. For example, you could name your son as the trust beneficiary and prevent him from spending all of his inheritance at once by restricting how much money he can access. Here are other advantages of a revocable trust:

Revocable trusts are flexible

The beauty of a revocable trust is that you have the freedom to move assets in and out of the trust as your circumstances dictate. For example, if you set up a family trust and then have more children, you can add them as new beneficiaries.

Revocable trusts are private

Assets that are in the trust before you die do not go through probate, so the terms of the trust will not be exposed to the public, as with a will. All wills become part of the public record after they’re filed for probate.

Keep in mind that this privacy only extends to assets transferred into the trust during the grantor’s lifetime. Assets that pour over through your will into your trust after your death would still need to go through probate.

Revocable trust assets avoid probate

A major benefit to creating a trust is to expedite or avoid probate, or the legal process of proving a will. Assets bequeathed in a will must usually go through a court of law before they are released to the beneficiaries. (Small estates that are valued under a certain amount may not be subject to probate.)

Probate can be time-consuming and costly for your heirs. It may take time to file paperwork before beneficiaries finally receive their assets. For complex estates, the probate proceeding can take even longer, especially if a potential heir decides to contest the will.

→ Learn how much probate costs

A revocable trust can help avoid court appearances and probate proceedings and ultimately make things easier for your loved ones. Beneficiaries can receive assets faster with a trust than with a will since revocable trust assets (so long as they were placed in a trust during the grantor’s lifetime) don’t have to go through probate. As mentioned before, anything you transfer to a trust after you die would have to go through probate.

Even if you do have items that must be probated, a trust can still expedite the probate process since your beneficiaries can receive high-value assets from the trust first while they wait for less valuable items to pass through a will.

You can plan for incapacity with a revocable living trust

If you are physically or mentally unable to care for yourself, a state court may appoint a guardian to make legal and financial decisions on your behalf. The guardian has access to your bank accounts and handles your financial affairs. Trust assets, however, are off-limits. Instead, the trustee or successor trustee retains control and can maintain the assets as you intended.

If you have more questions about guardianship or conservatorship, or other end-of-life planning issues, you can speak with an elder law attorney.

Ready to shop for life insurance?

Disadvantages of revocable living trusts

A revocable trust (unlike some other kinds of trusts) provides little to no benefit when it comes to minimizing income tax. Because the grantor can change the terms of the revocable trust until they die, the assets remain under their ownership and are treated as such for tax purposes. The revocable trust doesn’t have a separate tax ID number while the grantor is still alive, so if you have a living trust, you’ll have to claim any money the trust generates on your tax return. (The IRS refers to a living trust as a grantor trust).

Additionally, a revocable trust does not help with reducing federal estate tax liability or inheritance taxes. Once the grantor dies, the assets in the trust become includable in the valuation of their estate for the estate taxes. Many people don't have to worry about this tax — only estates worth at least $12.92 million in 2023 have to pay it when they pass assets to someone other than a surviving spouse.

→ Learn more about different types of trusts and when to use them

Revocable vs. irrevocable trust

The difference between revocable and irrevocable trusts is that an irrevocable trust cannot be changed. The grantor of an irrevocable trust relinquishes all ownership and association with the trust, so once it’s created, the grantor can’t take back an asset or change the beneficiaries. In exchange for this rigid structure, the irrevocable trust offers some additional advantages, like asset protection. Revocable trusts become irrevocable trusts once the grantor dies, since the grantor is no longer available to consent to change or revoke the trust.

Revocable trusts are often less complicated and cheaper than irrevocable trusts, which tend to be more complex since they are structured with an extra purpose beyond passing assets. For example, an irrevocable trust can help with Medicaid eligibility because moving assets into the trust will decrease your overall estate value. If these are concerns you have when planning for the future, then you might want to consult with an estate attorney who can provide the legal expertise to craft your trust.

→ Learn about how an irrevocable trust works, including its advantages and the many different types

Cost of trusts

It can be pricey to set up a trust, especially if you have a larger or more complex estate. Trusts also require maintenance and if you hire a corporate trustee, or a trust company, to manage it, you’ll have to pay fees. Oftentimes the benefits of having a trust outweigh the costs.

→ Read more about how much a trust costs