revocable living trust
A trust created during lifetime that can be changed or cancelled, designed to avoid probate and provide seamless asset transfer.
Example
“The revocable living trust transferred all assets to her heirs within weeks, avoiding 18 months of probate.”
Memory Tip
REVOCABLE — you retain control during life. Assets transfer privately at death.
Why It Matters
A revocable living trust matters because it allows you to maintain control over your assets during your lifetime while ensuring they transfer to your beneficiaries quickly and privately after you pass away, without the time and expense of probate court proceedings. This can save your family thousands of dollars and months of legal delays.
Common Misconception
Many people mistakenly believe that creating a revocable living trust means they no longer own or control their assets. In reality, you retain complete control and can modify or cancel the trust at any time during your lifetime, and you continue to pay taxes on the trust income as if the trust did not exist.
In Practice
Suppose Sarah creates a revocable living trust and transfers her house worth 500,000 dollars and investment accounts totaling 200,000 dollars into it. When Sarah passes away, these assets automatically transfer to her named beneficiaries within weeks without probate, potentially saving her estate 15,000 to 30,000 dollars in legal fees and avoiding a six-month to two-year court process.
Etymology
From Latin 'revocare' meaning to call back — a trust that can be recalled or changed.
Common Misspellings
Get a free financial plan from a real advisor
Related Terms
More in financial planning
Other financial planning terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.