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What is a Revocable Trust?

A couple learning what a revocable trust is

A Common Misunderstanding 

What is a revocable trust, and what is a living trust? Are they the same thing? Here’s a true story. I had a client who came to me, and she said she had a shocked look on her face. She said, “I don’t understand. My dad has passed away, we’re going to sell his house, and we have to go to court to get the name of the house changed. I thought we could avoid court. After all, he has a will, and he said that the house goes to us. I thought we got to avoid that process.” That is a fundamental misunderstanding. I see it all the time. 

Wills Go To Court

That is a misunderstanding of what a will is. A will is a court document. We use wills to control a process called probate. Probate is the administrative court proceeding that happens in the case of my death and my stuff gets divided up. We need someone who’s in charge. Someone can sell the house, pay the bills, and distribute the money. A will overwrites the default rules with your rule. So, we like wills, but they go to court. That’s what wills do; they control the court process.

A Way Out Of Court

If there’s a will, it must go to court to work. There’s another tool called a revocable trust or a living trust or a revocable living trust. Instead of directing my stuff to the public court system for public administration, I will take my assets that would need the court system, such as real estate, and I’m going to put them in this private family entity. So I’m going to get the stuff in this thing. Okay, this is called a trust. It’s a revocable trust. This means it can be revoked, just like a will. This is a will replacement. You do this instead of a will. You can tear this thing up anytime. You can change it anytime you want to, you can put stuff in this thing you can take stuff out of it. I like to think of it as being like an open Ziploc bag while I’m alive: Put it in. Take it out. I have full control over this thing. It’s just like a will, but it’s not court instructions. Instead, it’s instructions for how we operate this thing. Anything that ends up here is going to use a private agreement. So, it’s not a court document. We’re going to use a private family agreement to decide who’s in charge, where things go, and who gets what when. People use revocable trusts because it allows them to avoid the court system. They’re an excellent tool, a powerful tool, and a will replacement.

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