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Author: Brenton McWilliams

Estate Planning Topics: Is a Revocable Living Trust Right for You?

“Is a revocable living trust right for me?” In this article, I’ll help you make that decision by answering the question “What is a revocable living trust?” and providing a list of the pros and cons of using a revocable living trust as part of your estate planning.

What is a revocable living trust?

Sometimes called a living trust or just a revocable living trust, the term revocable living trust generally refers to a trust setup during a person’s lifetime for the purpose of distributing that person’s estate at their death. When you think of a trust, you make think of the long-term dynasty trusts designed to carry wealth through multiple generations of a family that are commonly part of television and movie plots. Although that’s a common use of trust, a trust can also be a useful planning tool for more simple estate plans.  The person creating the trust is referred to as the grantor or settlor of the trust. A typical scenario would be a trust that becomes irrevocable at the grantor’s death, provides for a new trustee at the grantor’s death, and instructs the trustee how to distribute the property within the trust to the trust beneficiaries. To take full advantage of the benefits of a revocable living trust, the property of the grantor should be placed in the trust at creation. Then, a pour over will is created in case any later acquired property is omitted from the trust. If there are assets outside of the trust without a defined beneficiary, the executor can probate the pour over will to move those assets into the trust to be distributed according to the terms of the trust.


Probate Avoidance

If the revocable living trust is properly funded with all of the property of the person creating the trust, there is no need to probate a will. The entire estate would be titled in the trust and managed by the trustee in accordance with the terms of the trust. Probate avoidance can be important if part of the estate plan involves disinheriting someone or if the beneficiaries such as children don’t get along well. Disinherited family members or fighting beneficiaries can hijack the estate plan by contesting the will early on in the probate process or hampering the progression of the estate by opposing the executor’s actions. By avoiding probate, the revocable living trust removes some of the usual methods of causing problems with the estate plan. There is still an opportunity to dispute the trustmaker’s competency or the terms of the trust. However, since the trust is not subject to oversight by the probate court, the procedure to dispute the estate isn’t built into the process.

Asset and Creditor Protection

After the trust is made irrevocable, if structured correctly, it can provide protection from creditors for both the trust grantor and the beneficiaries. For an irrevocable trust, creditors of the grantor can only reach the assets of the trust which the trustee has authority to pay out to the grantor or for the benefit of the grantor. If the beneficiary’s interest in the trust is held as a spendthrift trust, the trust property intended for the beneficiary can be protected from the beneficiary’s creditors by keeping the property within the trust.

Flexibility and Control

A trust is a very flexible tool for estate planning. A revocable living trust can be customized to fit the goals of the individual making the trust. A trust can be drafted to maintain some measure of control over the trust property after the grantor’s death. The control aspect can be used for many different goals. For example, a trust can hold an important piece of family property to allow the beneficiaries to use the property but prohibit any individual beneficiary from selling the property. If the beneficiaries are young or otherwise not good at managing money, the trust can be drafted to delay payment of the trust property to beneficiaries, to pay the trust property slowly over time to the beneficiaries, or, as discussed above, in the case of a spendthrift trust, avoid payment to a beneficiary with unpaid debt.


No Court Oversight

In contrast to a probate estate, there is no court oversight built into the trust administration. The trustee will typically have some periodic reporting requirement to the beneficiaries. Otherwise, if the trustee is mismanaging the trust, it can be difficult for the beneficiaries to find out. If the trustee does not provide required information, the beneficiary can be put in the awkward position of demanding reports from a family member who is the trustee or from a trustee that has discretion to cut off monthly payments to the beneficiary. A trustee can also be more difficult to remove from their position than an executor of an estate.


As discussed above, to take full advantage of the benefits of a revocable living trust, the property of the grantor should be placed in the trust at creation. That means the property will be titled in the name of the trust and, therefore, must be administered according to the terms of the trust. During the grantor’s lifetime, owning property in the revocable living trust typically is not very different from owning the property without the trust. The main difference being that any transfer of the property must be done as the trustee of the trust, and, for maximum benefit, the trustmaker should take care to ensure that future acquired property is titled within the trust.

However, when the trust becomes irrevocable, the administration of the trust will generally get more technical. The trustee will have certain restrictions on what they can and cannot do with the trust property that must be followed. Every trust is not alike. There may be some trust arrangements that are more common, but each trust must be administered by the trustee according to its terms. To fulfill the position of trustee, the trustee must carefully read over the trust and fully understand the terms. Otherwise, the trustee risks breaching their fiduciary duty to the trust. Depending on the complexity of the trust, the trustee may need to seek out the advice of an attorney to explain the terms of the trust to the trustee.

Tax Issues

Most of the time, a revocable living trust will be drafted will be drafted to have “grantor trust” status under the internal revenue code during the grantor’s lifetime. When a trust has grantor trust tax status, any taxes owed by the trust are taxed according to the grantor’s individual tax rate.  At the grantor’s death, the trust will usually lose its status as a grantor trust, and the trust income will be taxed at a higher rate. If the grantor’s personal residence will be titled in trust, the trust should be drafted to preserve the grantor’s tax exemption for a gain as a result of the sale of the personal residence.


Compared to an estate plan using a simple will, a revocable living trust will be more expensive. The additional cost of a revocable living trust may be offset by the money saved from not having to hire an attorney to probate the will or pay the court costs to probate court. In Alabama, the costs to probate a will in an uncontested probate estate can be very low. Consider also, that an attorney may have to be involved with winding up a trust.


For the cost conscious who have an estate that will not be contested, a revocable trust may not be a good fit. For those willing to spend a little more, who would like to prevent some friction among family members or feel some extended control over the estate is needed, a revocable trust is a good fit.

If you have questions about estate planning in Alabama, preparing a revocable living trust or estate plan, please call me at (251) 215-9275 or write me on the contact page to discuss how I can help.