Revocable Living Trust

What Does Revocable Living Trust Mean?

A revocable living trust is a trust that allows the grantor to make changes or amendments to it during their lifetime.

In the context of insurance, revocable living trusts are commonly used as an estate planning tool, often in conjunction with life insurance, to ensure financial support for the beneficiaries after the grantor’s death.

Insuranceopedia Explains Revocable Living Trust

The benefit of setting up a revocable living trust is that it allows beneficiaries to bypass the probate process after the grantor’s death. This can help preserve the value of the assets being passed on, as it eliminates the time and expenses typically associated with probate.

When a life insurance policy is owned by a revocable living trust, the death benefit passes to beneficiaries according to the trust’s terms rather than through standard life insurance beneficiary rules. This gives the grantor more control over how and when the proceeds are distributed. It is also worth noting that while the trust avoids probate, it does not automatically shield the death benefit from estate taxes; whether life insurance is taxable depends on factors like the size of the estate and who owns the policy.