Also known as: revocable trusts · living trust
Written by attorneys · grounded in primary & secondary sources — see below
A trust that the settlor may revoke or amend at any time during the settlor's lifetime. The settlor retains full control over the trust property and may direct the trustee's actions. Upon the settlor's death the trust becomes irrevocable and the remaining assets pass according to its terms without probate administration.
Rhea Reynolds, age eighty-two, executes a revocable trust transferring her investment accounts to a trustee. Her children later contest the trust on the ground that she lacked capacity. The court applies the same standard used to determine capacity to execute a will and upholds the trust because Rhea understood the nature of her property and the effect of the transfer.
Ralph Richardson places a parcel of land into his revocable trust. After his death the United States claims an easement over the land. The trustee asserts that the trust's retained powers allow the estate to contest the claim. The court treats the trust as the functional equivalent of the settlor's ownership for purposes of determining the scope of the original grant.
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Roberto Reyes transfers fractional interests in allotted land to a revocable trust. After his death his heirs challenge a federal statute that restricts descent of those interests. The court holds that the complete abolition of descent and devise rights for the trust property constitutes an unconstitutional taking.
Rosalind Reed creates a revocable trust that includes a general power of appointment for her spouse. After her death the Internal Revenue Service disputes the tax consequences of a state-court ruling interpreting the power. The federal court decides that it must independently determine the state-law character of the interest rather than defer to the lower state decision.
Rajesh Rao funds a revocable trust as part of his estate plan. After his death a beneficiary brings a tort claim in federal court alleging interference with an expected inheritance from the trust. The court holds that the probate exception does not bar the federal action because the claim does not require direct administration of the estate.
The capacity required is the same as that needed to execute a will. A court therefore evaluates whether the settlor understood the nature and extent of her property and the effect of the trust instrument.
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During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power.
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A later will may revoke or amend a revocable trust if the trust instrument or controlling law permits revocation by will. Many jurisdictions allow revocation by will when the trust does not require a different method.
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In most states a divorce automatically revokes any revocable disposition or fiduciary nomination in favor of a former spouse unless the trust instrument or a court order provides otherwise.
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…the owners of these interests to effectively control disposition upon death through complex inter vivos transactions such as revocable trusts is simply not an adequate substitute for the rights taken, given the nature of the property. Even the United States concedes that total abrogation of the right to pass property is…