Revocable Living Trusts are Companion Trusts

Posted by Ned Armand, President of Eastern Point Trust Company on Jun 3, 2015

Revocable Living Trusts are a good tool to begin to plan for your estate, but they are not the end-all be-all solution to estate planning.

Key Takeaways

  • Revocable trusts compliment irrevocable trusts since they cannot do all that an irrevocable trust can do.
  • Revocable trusts can have changes made during the life of the grantor, but cannot ensure a safe inheritance after the grantor's death.
  • Revocable trusts are often used for probate, but can be rolled into an irrevocable trust prior to death with Kiss Trust.


What is a Revocable (or Living) Trust?

Revocable Living Trust (RLTs) are used in many ways as a start to estate planning, but along with a will, may only be the first component to a comprehensive estate inheritance plan. While RLT stands for a Revocable Living Trust, these trusts can also have other names such as revocable trusts, living trusts, or even family trusts. They are more durable than a will but offer less security than an irrevocable living trust. Some people couple an RLT along with their last will and testament due to the flexibility of such a structure. Wills can dictate how non-property items will be handled, such as the guardianship of children or how debts should be paid, while the RLT can avoid probate, ensure privacy or avoid ambiguities.

How It Works

A Revocable Living Trust can be created while the trust maker (grantor) is living and the trust can be changed during the lifetime of the trust maker. The trust maker will change the title of the property to herein become the property of the trust, such as real estate or automobiles. The trust maker can change the terms of the trust, but only while they are living.

What It Accomplishes

An RLT is widely used to avoid probate, the headache-laden process of court-supervised division of property after an estate owner’s death. Sometimes, the trust maker is also the trustee, but that proves to be a challenge in many cases. It can also be used to clearly explain the division of property in an inheritance and increase inheritance privacy upon death.

What It Does Not Accomplish

A Revocable Trust is not a one-stop solution to your trust needs or estate planning needs. A trust managing your assets after your death should be detailed and precise, instead of open-ended and revocable. This is why many trust makers elect to have the assets held with the RLT pour over into an irrevocable trust upon death to control by who, when and how the final estate may be used.  A quick and easy solution for an irrevocable trust can be found at Kiss Trust.


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Tags: Irrevocable Trust, revocable trust, Inter Vivos Trust

Advisor Series #3: Revocable Living Trusts – Unseen Risks

Posted by Ned Armand, President of Eastern Point Trust Company on Nov 5, 2014

Today it is almost automatic for financial advisors to create “Revocable Living Trusts” (RLT) for their clients along with a “Durable Power of Attorney” (DPOA). 

Durable Power of AttorneyRevocable Living Trust, Irrevocable Trust, Kiss Trust

The DPOA is designed to address the circumstances of clients who no longer may have the capacity to act for themselves. For example, if an otherwise healthy person is in an accident and left incapacitated, temporarily or permanently. In such an occasion, the DPOA ensures that you have already chosen an “agent” and given them broad powers to act on your behalf, and in your place. Additionally, a DPOA usually indemnifies the person acting as your agent against any resulting liability arising from their actions. 

DPOA and RLT Combination

The combination of a DPOA and RLT arrangement can work with no issues when the spouse and/or family of your client cares for, protects, and preserves your client's intentions. Unfortunately, not every family fulfills this promise. 

So long as both spouses are alive and competent, any actions (changing or revoking the trust, purchasing or disposing of assets) will necessitate both spouses’ approval. The unseen risk arises when one spouse dies or becomes incompetent, the other spouse may act alone. In blended family circumstances, there are instances where this power has been abused to the detriment of the incapacitated spouse’s heirs from the prior marriage. 

Impaired Spouse Risk

Consider now the situation where one spouse is previously deceased and the surviving spouse develops a lack of capacity. Now, the DPOA is triggered and the person (agent) holding the DPOA has the power to change or revoke the RLT, or use, purchase or dispose of the RLT's assets unilaterally. 

A Better Design

While an RLT and DPOA are powerful tools, there are better design alternatives than the two of them combined. Consider this alternative design: Upon the first spouse becoming incapacitated or upon their death, the RLT is set to “Pour-Over” all of the RLT assets into an irrevocable trust with a “Spousal Support” provision. This three-part design will ensure that neither the other spouse nor the DPOA agent will be able to misuse the assets of the trust, whether by neglect, incompetence or intent. 

Also, we all know that there is often a material lag between the time that a previously capable widowed spouse may start showing signs of incompetence and the point where their ability to act is removed from them – during this time many bad financial decisions, often irreversible, may occur. This risk is compounded by unscrupulous people who seek to take advantage of such situations. However, with the Pour-Over design, only the spousal support portion of the trust could be accessed by the spouse, or anyone else, and the other provisions of the trust remain secure. 

In Conclusion

Revocable Living Trusts are powerful tools to avoid probate and protect the privacy of clients. However, RLTs have shortfalls that should be carefully considered. 

Designing your client’s RLT with a Pour-Over features into a pre-established “Sleeping Irrevocable Trust” will ensure your client’s intentions are fulfilled and eliminate many potential risks left open by an RLT and DPOA alone.

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Tags: Estate Planning, revocable trust, Financial Advisor

Advisor Series #2: Revocable and Irrevocable Trusts! Why Not Both?

Posted by Ned Armand, President of Eastern Point Trust Company on Nov 3, 2014

There is much misinformation and misconception surrounding revocable living trusts and irrevocable trusts.

Advisor, Irrevocable Trust, Blended Family Trust, Revocable Trust, Kiss Trust

Picking the Right Tool

At first glance, one could seemingly identify the main purpose of these trusts merely by observing their names. Revocable living trusts (RLT) are just that, revocable, and can be revoked and amended at any time by their grantor(s). Irrevocable trusts are irrevocable and cannot be revoked or amended by their grantor(s) (however, they may be amended by the trustee if provided for in the document).

10 Gallons of Water in a 5 Gallon Bucket

Often, revocable living trusts are used for tasks that they were never meant to achieve, such as managing the grantor’s assets after their death. Revocable living trusts are wonderful tools to manage assets of the grantor(s), avoid probate, and provide maximum flexibility during the grantor’s life. However, upon the first grantor’s death, the power left to the surviving spouse to revoke or amend the trust is a risk that can be abused.

Bring in the Ringer

Irrevocable trusts are a perfect second act to a client’s estate planning; the better design is for the RLT to “pour over” into the irrevocable trust after the first spouse (one of the RLT grantors) has died. Having an irrevocable spousal support trust established in advance to manage the assets after the death of the first spouse, will allow for the surviving spouse to be provided an income stream and assets to meet their needs. Additionally, the irrevocable trust protects the integrity of the deceased spouse’s intentions, and distributes the assets according to the language of the trust upon the death of the surviving spouse.

Let’s recap what we have learned;

  • RLTs are great tools for your clients, and should only be used for avoiding probate and providing flexible asset management during the lifetime of the grantors, but RLTs are often misused, and doing so introduces new risks.

  • The RLT should be designed to “pour over” its assets into the pre-established irrevocable spousal support trust. With this plan in place, the surviving spouse is provided for and both spouses’ intentions are protected from being altered by the surviving spouse (or their attorney).

  • Irrevocable trusts can be created as “sleeping trusts” which sleep awaiting the passing of the first spouse.

  • Finally, the use of an RLT as the sole trust in a blended family opens the door for even greater risk
Help your client's evaluate all of their trust planning risk factors by downloading our Final Estate Planning Checklist below.

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Tags: Blended Family Trust, Irrevocable Trust, Inheritance Trust, revocable trust, Financial Advisor

What is a Living Trust and When Does It Make Sense?

Posted by Ned Armand, President of Eastern Point Trust Company on Oct 15, 2014

The Basics

A living trust is a revocable legal structure in which a trustee manages assets for someone's benefit. It is a trust that is created during your lifetime. In other words, while you are living, you transfer title to your assets into the trust. You use the revocable trust to gather your assets under one structure, so that the assets are efficiently distributed upon your death and your estate avoids the time and cost of the probate process.

Use of Assets While You Are Alive

Some of the advantages of using a living trust are:

  • You are able to use the assets in the trust.
  • You are able to remove, substitute, or consume the assets from the trust, or put the assets to use just as if you had never created the trust.
  • It is also an easy way to organize your assets and manage them as a single unit.

Distribution of Assets

Living Trust, Irrevocable Trust, Revocable Trust, Trust

Like a will, a revocable trust also allows you to specify to whom your assets shall be distributed when you die.


Living trusts are  revocable trusts. That means, if you pass away, your spouse can change the terms of the trust. This may be to the detriment of your heirs from prior marriages. Also, revocable trusts do not provide the ability to control when and how the assets of the trust are used after you die – you can only specify who gets the money they can then use the assets as they choose. Only an irrevocable trust can control when and how the assets of the trust are utilized and protect the terms of the trust from being changed after your death.

Pour Over

A common solution is to create a living trust, but also plan that upon the death of the first spouse the assets are poured over into an irrevocable trust. This provides the remaining spouse an income but also protects who, when and how the remainder of the assets (after the death of the spouse) may be used by the heirs.

Weigh Your Options

While revocable living trusts are a great tool, their primary purpose is to avoid probate. An irrevocable trust also avoids probate, and allows you to control not only who receives the money, but when and how it may be used.

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Tags: Irrevocable Trust, revocable trust, Living Trust

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