Who Owns a Revocable Trust?

A revocable trust is a popular estate planning tool that provides flexibility and control over your assets during your lifetime. However, questions often arise about property ownership within the trust, especially concerning who holds the legal and beneficial interest. 

In a revocable trust, the founder (also known as the settlor or grantor) retains ownership and control over the trust and its assets during their lifetime. While the assets are legally titled in the name of the trust, the founder typically serves as the trustee and beneficiary, maintaining full authority over:

  • Managing the trust assets.
  • Adding or removing assets from the trust.
  • Amending or dissolving the trust entirely.

This structure allows the founder to use and enjoy the trust’s assets as they would if they owned them outright.

Who Owns the Assets in a Revocable Trust?

  1. During the Founder’s Lifetime:
    • The founder retains effective ownership of the trust’s assets because they have the power to revoke or modify the trust at any time.
    • The trust is considered a “pass-through entity” for tax purposes, meaning the founder reports any income or expenses related to the trust assets on their personal tax returns.
  2. Upon the Founder’s Death:
    • Ownership transitions according to the trust’s terms.
    • The successor trustee takes over management of the trust, and the beneficiaries gain equitable ownership of the assets.
    • At this point, the trust typically becomes irrevocable, preventing further modifications or revocations.

Who Owns the Property in a Revocable Trust?

Legally, the property in a revocable trust is owned by the trust itself, with the title often registered in the name of the trust. However, because the founder retains control and can dissolve the trust at will, they are effectively the owner of the property during their lifetime.

For example:

  • If a founder transfers a house into a revocable trust, the title deed will reflect the trust’s ownership. However, the founder retains the right to live in, sell, or mortgage the house as they please.

Does a Revocable Trust Become Irrevocable Upon Death?

Yes, a revocable trust generally becomes irrevocable upon the founder’s death. At this stage:

  • The terms of the trust become fixed.
  • The successor trustee is obligated to manage and distribute the assets as specified in the trust deed.
  • Beneficiaries receive their inheritance without the delays and costs associated with probate.

This transition ensures that the founder’s wishes are respected and provides a smooth process for asset distribution.

Advantages of Using a Revocable Trust

  1. Control:
    • The founder maintains complete control over the trust during their lifetime.
  2. Avoidance of Probate:
    • Assets held in a revocable trust are not subject to probate, ensuring faster and more private distribution to beneficiaries.
  3. Flexibility:
    • The trust can be amended or dissolved to reflect changes in the founder’s circumstances or wishes.
  4. Continuity:
    • A successor trustee seamlessly takes over upon the founder’s death or incapacitation, ensuring uninterrupted management of the trust’s assets.

In a revocable trust, the founder effectively owns the property during their lifetime, even though the trust holds the legal title. This arrangement provides flexibility and control while facilitating a smooth transfer of assets upon death. At Burger Huyser Attorneys, we understand the complexities of trust law and can guide you in setting up a revocable trust that aligns with your estate planning goals. Contact us today to secure your legacy and protect your assets.

Contact Burger Huyser Attorneys, and book a consultation.

To speak to one of our experienced attorneys in South Africa for immediate assistance, contact us on the numbers below:

Randburg call 061 516 6878; Roodepoort call 061 516 0091; Sandton call 064 555 3358 Pretoria call 064 548 4838;

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DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE