Questions About Revocable Living Trusts

• Your family home can be added to your revocable living trust. Ben Bloom/Photodisc/Getty Images

  A revocable living trust is a plan you make regarding the management of your assets and the distribution of your property upon your death. A revocable living trust is made while you are still alive and can be terminated by you at any time. The trustee you name in the documents is the designated person who handles the trust, and your beneficiaries receive the income and assets. Revocable living trusts are often used to avoid probate, the court process for the settling of an estate.

Who is Allowed to be the Trustee?

• An adult under your state law -- usually someone 21 years of age or older -- who is mentally competent can serve as your trustee, or you may be the trustee yourself. You are permitted to name a successor trustee; the successor is a person who will become trustee only if the trustee you named becomes incapacitated. Any trustee or successor trustee you name should be fully versed in his duties to ensure that your trust is distributed and managed in the way you designed.

Who are My Beneficiaries?

• Your first beneficiary is typically yourself or yourself and your spouse in a revocable living trust. However, you may name whomever you wish to leave assets to as your beneficiaries in your trust, and charities or other organizations can be included if you desire. However you set up your beneficiaries, you should include exact instructions for your trustee covering the distribution of your assets upon your death.

When Do I Fund the Trust?

• You do not have to fund the trust immediately upon setup. Some people only put a small amount of money into the trust at first, like $20, leaving the trust "unfunded." You may put all of your assets into the trust immediately or add your assets slowly over time. The trust can be designed to fund in the event of your death or incapacitation, so when either event occurs, your remaining assets are added to the trust, but you may need a will directing the funding of your trust upon death.

What Doesn't the Trust Do?

• A living revocable trust will not save you money on your income or estate taxes. The income your trust earns is still considered your income under federal and state tax laws. The property in the trust at the time of your death is added to your estate's total taxable value.

  A living trust will not protect your assets from creditors. Creditors whom you owe money to at the time of your death may collect against your trust. While creditors can also file claims against an estate in probate, the time to do so is limited under most state laws.

Do I Need an Attorney?

• You may use living trust "kits" sold in legal print stores and online to prepare your trust yourself, but making a mistake in the documents may result in huge costs to you or your beneficiaries later. An attorney or financial planner can prepare trust documents that are legal and represent your wishes. Living trust "advisers" are sometimes con artists who are looking to prey on your fear for your family's financial well-being after your death, so research any living trust professional you are considering.