What is a Revocable Trust?
The purpose of a Revocable Trust is primarily to avoid probate. If an individual passes away owning property in their individual name, probate is required. A probate is technically a lawsuit filed in District Court in which one of the individuals interested in your estate (an heir, your spouse, or a creditor) petitions the court and asks the court to enter an order requiring your property to be conveyed by the executor or administrator, to various parties. Notices are published in newspapers, your assets become a matter of public record at the courthouse, and the executor or administrator must, in large part, request permission from the court to dispose of property and take action in administering your estate.
The creation of a Revocable Trust, and the conveyance of property to the trustee, avoids the necessity of probate because the trust entity survives your death and the trust is then administered by a successor trustee. Please understand that even if you establish a Revocable Trust, if you die owning property in your individual name, we will be required to probate your estate, and will defeat the primary purpose of the trust. As such, it is imperative that, if you elect to use a Revocable Trust, all of your assets that do not otherwise pass outside of probate be conveyed to the Revocable Trust.
Please note that a Revocable Trust is seen by the IRS as a "grantor" trust, and as such, the IRS ignores the existence of the trust. You continue to file a Form 1040 and you do not even obtain an employer I.D. number for the trust until your death. No tax savings are achieved with the Revocable Trust (either in the context of income or estate tax). The trust can be modified or terminated by you at any time, due to the revocation provisions which are included in the instrument.
The Revocable Trust can be modified at any time by you in the event you change your mind concerning any of these issues as long as you are mentally competent.