Living trusts (also called revocable trusts) are any trust where the settlor retains the ability to alter the trust or end the trust altogether, unlike irrevocable trusts. There are numerous types of living trusts and reasons for using them. Generally, living trusts come with benefits of flexibility, but importantly, living trusts may result in the settlor facing higher tax and creditor liability than irrevocable trust may allow. Individuals may want to use living trusts so that they can fund the trust over time and change the assets in the trust as needed, instead of having a will with much less flexibility and more hassle. Some may create living trusts in order to ensure the trust assets can be appropriately managed should the settlor become unable to do so. Others may use irrevocable trusts for investment purposes for their personal income.
[Last updated in February of 2022 by the Wex Definitions Team]