Will only
Passes through probate court
Revocable living trust
Avoids probate entirely
How a revocable living trust works
You are the trustee: When you create a revocable living trust, you transfer your assets into the trust — but you remain the trustee and manage everything exactly as before. Your Social Security number is used, you file the same tax return, and nothing changes from a practical standpoint during your lifetime.
Revocable means changeable: You can amend, modify, or revoke the trust at any time during your lifetime. Add assets, change beneficiaries, or change the trust terms — full flexibility is retained.
At death: Your named successor trustee steps in immediately — no court appointment needed — and distributes assets to beneficiaries per the trust terms. The process can be completed in weeks rather than months or years.
Tax treatment — what a revocable trust does and does not do
Does not reduce income taxes: Because the trust is revocable, the IRS treats it as a grantor trust — all income is reported on your personal tax return as if the trust did not exist. No separate trust tax return is required during your lifetime.
Does not reduce estate taxes: Assets in a revocable trust are still included in your taxable estate. A revocable trust provides no estate tax benefit by itself — for estate tax reduction, irrevocable structures (SLATs, ILITs, GRATs) are required.
Does provide a step-up in basis: Assets held in a revocable trust at death receive a step-up in cost basis to fair market value — the same as assets held outright. Heirs inherit with no embedded capital gains.
| Factor | Revocable living trust | Irrevocable trust (SLAT, ILIT, etc.) |
|---|---|---|
| Can be changed | ✓ Yes — full flexibility | ✗ No — permanent |
| Probate avoidance | ✓ Yes | ✓ Yes |
| Estate tax reduction | ✗ No | ✓ Yes — removes assets from estate |
| Income tax treatment | Grantor trust — your SSN, your return | Varies — grantor or non-grantor |
| Control retained | ✓ Full control | Limited — cannot control irrevocable trust |
| Creditor protection | None — revocable trusts offer no protection | Strong — properly structured irrevocable trusts |
| Primary purpose | Probate avoidance, incapacity planning, privacy | Estate tax reduction, asset protection, wealth transfer |
Fund the trust — the most commonly missed step
Creating a revocable trust without funding it is one of the most common estate planning mistakes. The trust only controls assets that are titled in the trust's name. Real estate deeds must be re-titled, bank and brokerage accounts must be re-registered, and business interests must be transferred. Assets that remain in your name alone will still go through probate. Work with your estate planning attorney to complete the funding process — the trust document alone is not enough.