What Is a Revocable Trust or Living Trust and Do You Need One?

If you've researched estate planning at all, you've probably heard about a living trust, also called Revocable Trusts. Some sources make them sound absolutely essential. Others suggest they're unnecessary complications.

So what's the truth? What exactly is a Revocable Trust, and do you actually need one?

This guide cuts through the confusion and helps you understand Revocable Trusts in plain language—what they do, how they work, and whether one makes sense for your family.

What Is a Revocable Trust?

A Revocable Trust (also called a "revocable living trust" or "inter vivos trust") is a legal arrangement where you transfer ownership of your assets into a trust during your lifetime. You control those assets as the trustee while you're alive and capable, and a successor trustee you name takes over when you die or become incapacitated.

Think of it this way: you're creating a container or account (the trust) and putting your assets into it. You write the rules for what happens to everything in the container. And you name someone to enforce those rules if you can't.

The "living" part means you create it while you're alive, as opposed to a testamentary trust which is created through your will after death.

The "revocable" part means you can change or cancel it at any time. It's not permanent until you die. Then, it becomes irrevocable.

The Three Key Roles in a Trust

Every Revocable Trust has three roles:

• Grantor (or Settlor): The person who creates the trust and transfers assets into it. This is you.
• Trustee: The person who manages the assets in the trust. While you're alive and capable, this is also you. You lose no control.
• Beneficiary: The person who benefits from the trust. While you're alive, this is you. After you die, these are the people you've chosen to inherit.

So initially, you're wearing all three hats. You create it, manage it, and benefit from it. Nothing changes in your day-to-day life.

How a Revocable Trust Actually Works

Here's what happens when you create a Revocable Trust:

During Your Lifetime

1. You create a trust document that outlines all the rules
2. You transfer ownership of your assets from your name to the trust's name
3. You continue managing everything exactly as before
4. You can buy, sell, or change assets freely
5. You can modify or revoke the trust at any time

From a practical standpoint, you're still in complete control. You can still sell your house, spend your money, or make any financial decisions you want.

If You Become Incapacitated

If you become unable to manage your affairs due to illness or injury:

1. Your successor trustee (the person you named) steps in
2. They manage the assets according to your instructions
3. They can pay your bills, manage investments, handle property held in the trust
4. No court proceedings are required
5. The transition is seamless

This is a huge advantage over having only a will, which doesn't help during incapacity.

When You Die

When you pass away:

1. Your successor trustee takes control
2. They distribute assets according to your instructions
3. Assets transfer to beneficiaries without court involvement – as long as you transferred the assets to your trust during your life
4. The process is private (not public record)
5. Distribution typically happens within weeks, not months or years

This is where the biggest benefits appear—avoiding probate court.

What Goes Into a Revocable Trust?

You can transfer almost any asset into your trust:

• Real estate: Your home, rental properties, vacation homes 
• Bank accounts: Checking, savings 
• Investment accounts: Brokerage accounts (except retirement accounts) 
• Business interests: LLC ownership, partnership shares 
• Valuable personal property: Art, jewelry, collections

What typically doesn't go in a trust:

• Retirement accounts (401k, IRA): These use beneficiary designations instead
• Health savings accounts (HSAs)
• Vehicles (usually not worth the hassle unless very valuable)
• Everyday personal belongings: Although you can assign all your personal property to your trust

The Big Benefit: Avoiding Probate

One of the primary reasons people create Revocable Trusts is to avoid probate: the court process for distributing assets after death.

What's Wrong With Probate?

• It's slow: Probate typically takes 6 months to 2 years, sometimes longer.
• It's expensive: Court fees, attorney fees, and executor fees typically total 3-7% of your estate value. For a $500,000 estate, that's $15,000-$35,000.
• It's public: Anyone can look up probate records and see what you owned, who inherited it, and any family disputes that arose.
• It's complicated: Your family must navigate court proceedings during an already difficult time.

How a Trust Avoids All This

Assets held in a properly funded Revocable Trust skip probate entirely. Your successor trustee can begin distributing assets according to your instructions immediately—no court, no delays, no public records.

For families with significant assets or property in multiple states, the savings in time, money, and hassle can be substantial.

Other Benefits of Revocable Trusts

Beyond avoiding probate, Revocable Trusts offer several advantages:

Incapacity Protection

If you become incapacitated, your successor trustee can step in immediately to manage your financial affairs (provided that you transferred assets (“funded”) to your trust. With a will alone, your family might need court-appointed conservatorship – another expensive, time-consuming process.

Control Over Distributions

A trust gives you much more control than a will over how and when beneficiaries receive their inheritance.

With a will, assets typically transfer outright when beneficiaries reach legal age (18 or 21). With a trust, you can:

• Stagger distributions over time (e.g., 1/3 at 25, 1/3 at 30, 1/3 at 35)
• Set conditions (e.g., must complete college)
• Protect assets from beneficiaries' creditors or divorces
• Provide for a special needs beneficiary without affecting government benefits

Privacy

Probate is public record. Anyone can look up what you owned and who inherited it.

Trust distributions are completely private. Only you, your trustee, and your beneficiaries know the details.

Property in Multiple States

If you own real estate in multiple states, your estate would normally face probate proceedings in each state (called "ancillary probate").

A trust avoids this entirely. All property transfers according to the trust instructions, regardless of location.

Flexibility for Blended Families

Trusts are particularly useful for blended families. You can provide for your current spouse during their lifetime while ensuring your children from a previous marriage eventually inherit.

The Downsides of Revocable Trusts

Revocable Trusts aren't perfect. Consider these drawbacks:

Upfront Cost and Effort

Creating a trust costs more than creating a simple will. If you use an attorney, expect to pay $1,500-$5,000. Online platforms like Herbie reduce costs significantly but still require more investment than a basic will.

Funding Requirements

Creating the trust document is only half the work. You must actually transfer assets into the trust (called "funding"). This means:

• Transferring real estate deeds
• Changing bank account titles
• Updating investment account ownership
• Changing business ownership documents

If you forget to fund the trust, it doesn't protect those assets. Many people create trusts but never properly fund them, wasting their investment.

Ongoing Maintenance

As you acquire new assets, you need to remember to put them in the trust. Buy a new house? It needs to be deeded to the trust. Open a new bank account? It should be in the trust's name.

Refinancing Complications

Some lenders might have specific requirements when refinancing. It's manageable but adds steps.

Overkill for Simple Situations

If you're young, have modest assets, and a straightforward family situation, a trust might be more than you need right now.

Do You Actually Need a Revocable Trust?

Here's how you can think about it:

Think about a Trust If:

• You own real estate in multiple states. This alone often justifies a trust to avoid multiple probate proceedings.
• Your estate is worth $500,000+. The probate costs saved justify the trust creation cost.
• Privacy is very important to you. If you don't want your estate details public, a trust is the way.
• You have minor children and significant assets. A trust can manage assets for their benefit until they're mature enough to handle them.
• You have a blended family. Trusts help balance providing for a current spouse while protecting children's eventual inheritance.
• You want to control when/how beneficiaries inherit. If you're worried about a beneficiary's maturity or judgment, a trust lets you set conditions.
• You own a business. Trusts facilitate smoother business succession.
• You have a disabled beneficiary. Special needs trusts protect their government benefits.

You May Not Need a Trust If:

• Your estate is under $200,000. Many states have simplified probate for smaller estates. The cost of a trust might not be worth it.
• You're young and healthy with few assets. Start with a will, add a trust later as your wealth grows.
• You're leaving everything to your spouse outright. Spousal inheritance is often simplified in probate.
• Your primary assets are retirement accounts. These use beneficiary designations and avoid probate anyway.
• You don't own any real estate. Real estate is the main asset that makes probate expensive and complicated.

How to Create a Revocable Trust

You have two main options:

Work With an Attorney

• Pros: Personalized advice, handles complex situations, includes funding assistance
• Cons: Expensive ($1,500-$5,000+), time-consuming, requires scheduling meetings
• Best for: Complex estates, unusual situations, high-net-worth families

Use an Online Service Like Herbie

• Pros: Much more affordable (a Herbie One subscription is $99/year to make and update your plan over time), completed at your own pace, still legally valid
• Cons: Less personalization, you're responsible for keeping track of funding, may not handle very complex situations
• Best for: Most families with straightforward situations

Herbie offers a complete estate plan including a revocable Revocable Trust as part of a Herbie One subscription for only $99/year. Built by attorneys from top law firms, it delivers attorney-quality documents at a fraction of the cost. The platform includes:

• Revocable Living Trust
• Pour-over will
• Power of attorney
• Healthcare directive
• Unlimited updates as life changes
• Secure document storage

Common Living Trust Myths

Myth: A trust protects assets from creditors. 

• Reality: A revocable Revocable Trust offers no asset protection during your lifetime. You control the assets, so creditors can still reach them. It may protect them for your beneficiaries, though, after you pass away (depending on the trust’s terms).

Myth: A trust avoids estate taxes. 

• Reality: A simple Revocable Trust often doesn't impact taxes. Special types of trusts can help with tax planning, but basic revocable trusts don't.

Myth: Once you create a trust, you lose control. 

• Reality: With a Revocable Trust, you maintain complete control. You can change, amend, or revoke it anytime.

Myth: You don't need a will if you have a trust. 

• Reality: You still need a "pour-over will" to catch any assets not in the trust and to name guardians for children.

Myth: Trusts are only for wealthy people. 

• Reality: While they benefit larger estates more, trusts can make sense for moderate estates too, especially if you own property in multiple states.

Making Your Decision

Ask yourself these questions:

1. Is my estate worth more than $500,000?
2. Do I own real estate in more than one state?
3. Do I have minor children and want to control when they inherit?
4. Is privacy important to me?
5. Do I have a blended family?
6. Am I worried about a beneficiary's ability to manage a large inheritance?

If you answered yes to two or more questions, a trust is probably worth considering.

If you answered no to most questions, a will may be sufficient for now. And you can always add a trust later.

Take the Next Step

The most important decision isn't whether to start with a will or a trust—it's the decision to start at all.

Begin with Herbie’s free trial today. Get basic protection in place in minutes. Then, when you're ready for comprehensive planning including a trust, upgrade to Herbie One.

Don't let confusion about trusts keep you from protecting your family. Start simple, and build from there.

Get started with Herbie →

‍