When you hear about someone having a “trust fund,” you might imagine a mansion on a hill, a butler and expensive shoes. Sure, those exist. But in reality, trusts are not just for the wealthy—they offer significant benefits to a wide range of people.

This article focuses on the Revocable Living Trust (Rev Trust), a powerful estate planning tool that will be available through Herbie. Think of it as a flexible alternative to a Will, with added benefits. Let’s explain.

What Is a Trust?

A trust isn’t a single thing—it’s a legal arrangement where someone (a trustee) holds property or assets for the benefit of someone else (a beneficiary). This arrangement is outlined in a trust agreement, which is simply a contract that determines how the assets will be managed and distributed. The trustee is required to manage the assets in the trust according to the terms of the trust agreement. So in reality, a “trust fund” is really just a bank account in the name of a trust.  

What Is a Revocable Living Trust (Rev Trust)?

A Revocable Living Trust, also known as a Revocable Trust, Living Trust, or Inter Vivos Trust (Latin for “during life”), is what is commonly called a “Will Substitute” – it outlines the key terms of your estate plan instead of your Will. You’ll still have a Will, but it will simply pour over your assets into the trust (hence, a “pour-over Will”).

The trust has two important characteristics:

• It’s effective while you are alive – Unlike a Will, which only takes effect after death, a Rev Trust is active during your lifetime.
• It is revocable – This means, like a Will, you can modify or revoke the terms at any time.

Benefits of a Revocable Living Trust

There are many reasons why it’s advantageous to create a Rev Trust. Here are some of the most important reasons:

Avoids Court

• When someone with only a Will passes away, the Will needs to be submitted to court in a proceeding called probate. This can be a complicated, time consuming and expensive process, especially during a period of mourning. Read more about probate in our article What’s Probate and Why Should I Avoid It?
• If you transfer assets to your Rev Trust during life, then your family members will have immediate access to those assets when you pass away, without court involvement. This will allow for much faster distribution to your family and will reduce all the stressors brought about by the complexity, court costs and legal fees of the probate process.

Maintains Privacy

• Your Will becomes a public document when it’s filed in court.  
• A Rev Trust remains private. Therefore, when all the important terms of your estate plan are in your Rev Trust (instead of your Will), this will keep your wishes private.

Provides Flexibility and Control

• With a trust, you can create terms and limitations on how your family members will inherit your assets after you pass away.  
• For example, you may want to keep your assets in trust until your child turns a specific age, or even for your children’s entire lifetime. You can change these specifics at any time during your lifetime.  
• This flexibility can be particularly important if you have young children. Creating a trust means that the assets passing to your children would remain protected and under the control of the person you appoint as the trustee.

Planning In Case of Injury or Limited Capacity

• If you become unable to handle your own wellbeing and finances, in certain instances, a court may have to decide who could help handle your affairs. But with a Rev Trust, you can control the process.  
• You can name your trustee to handle your affairs, and you can transfer funds to your trust during your lifetime so your trustee can access them for your benefit, without the need of a power of attorney or any court-appointed guardianship.

Simplifies Estate Administration

• Thanks to the clear instructions of a trust agreement, the process of administering your estate after you pass away should be easier, resulting in more efficient asset distribution and therefore less stress and complexity for loved ones.  
• Clear guidance from the trust agreement can also help minimize legal challenges and family disagreements.

Helps with Out-of-State Property

• If you own property in another state (such as a vacation home), a Rev Trust can greatly reduce administrative burdens after you pass away.
• If you don’t own the property in the trust, your family may need to pursue a separate court proceeding in that state to transfer title to the house. But if you transferred ownership of the property to your Rev Trust, you can prevent that from being necessary.

Estate Tax Planning

• Most people do not owe estate taxes when they pass away.  
• That being said, for those who will owe state or federal estate taxes, a Rev Trust can help with efficient tax planning.

Is a Revocable Living Trust Right for Me?

Some people may not benefit as much from having a trust set up. Here are some factors to consider:

Ongoing Administration – A Rev Trust requires ongoing administration after you pass away. Your designated trustee will have ongoing responsibilities, such as maintaining assets in a bank account and tracking when distributions should or need to be made to your family members.

Few Assets – If your estate is small and straightforward, a simple Will may be sufficient.

No Minor Children – If you don’t have minor children, you might not be as concerned about how your assets are distributed to your family members after you pass away.

Make a Revocable Living Trust with Herbie

If you subscribe to Herbie, you will be able to make, revise and monitor the terms of your Rev Trust throughout your life. We hope to welcome you into the Herbie family soon!