Also known as: revocable living trusts · revocable trust · revocable trusts · living trust · living trusts · inter vivos trust · grantor trust
Written by attorneys — see sources below.
A trust established by a settlor during the settlor's lifetime that the settlor may amend or revoke at any time. The settlor typically serves as trustee and beneficiary during life, with a successor trustee distributing assets to remainder beneficiaries upon the settlor's death without probate administration.
Ruby Rivera executes a will that directs her residuary estate to the trustee of her existing revocable living trust. The trust instrument was signed during her life but holds no assets at death. The pour-over provision adds the probate assets to the trust for distribution to her children under the trust terms.
Roger Ramirez, diagnosed with mild dementia, signs a revocable living trust naming his daughter as successor trustee. He later amends the trust to add bank accounts. A court applies the same capacity test used for wills and upholds the trust and amendment because Roger understood the nature of his property and the beneficiaries.
Ricardo Rojas, domiciled in State A, creates a revocable living trust holding real property in State B. After his death the successor trustee seeks to administer the trust under State A law. The court weighs the parties' expectations and the trust's connection to each state to select the governing law for administration issues.
Robert Rivera, as trustee of the Marvin M. Brandt Revocable Trust, claims fee title to a former railroad right-of-way. The United States asserts the land reverted upon abandonment. The trust's ownership interest turns on whether the original conveyance conveyed a fee or an easement.
In 1908 the Laramie, Hahn's Peak and Pacific Railroad obtained a 200-foot-wide right of way across public lands in Wyoming under the General Railroad Right-of-Way Act of 1875. The railroad completed construction of its line in 1911. The line later passed through several owners and was used primarily to transport timber and cattle. In 1976 the United States issued a land patent conveying an 83-acre parcel in Fox Park, Wyoming, to Melvin and Lulu Brandt. The patent conveyed to the Brandts fee simple title to the land "with all the rights, privileges, immunities, and appurtenances, of whatsoever nature, thereunto belonging, unto said claimants, their successors and assigns, forever." The patent stated that the land was granted "subject to those rights for railroad purposes as have been granted to the Laramie[,] Hahn's Peak & Pacific Railway Company, its successors or assigns." The right of way crossed approximately ten acres of the patented parcel. In 1996 the Wyoming and Colorado Railroad notified the Surface Transportation Board of its intent to abandon the right of way. After removing the tracks and ties and obtaining Board approval, the railroad completed abandonment in 2004. In 2006 the United States filed suit seeking a judicial declaration of abandonment and an order quieting title to the right of way in the Government. The complaint named the owners of 31 parcels crossed by the abandoned right of way, including Marvin Brandt who held the Fox Park parcel through a family trust. Brandt contested the claim and filed a counterclaim asserting that the right of way was a mere easement extinguished by abandonment. The district court granted summary judgment to the United States. The Court of Appeals for the Tenth Circuit affirmed. The Supreme Court granted certiorari.
View caseRosalind Reed funds a revocable living trust and serves as trustee with broad powers to alter distributions. Upon her death the IRS includes the trust corpus in her estate. The court examines whether the retained powers equate to ownership for tax purposes.
The executor paid the federal estate tax that included the value of the trust principal and filed suit for a refund in the district court. All facts were stipulated for the district court proceeding. The district court ruled for the government. The executor appealed to the United States Court of Appeals for the First Circuit. The decedent had been a donor to three inter vivos trusts previously established by his wife. He served as a trustee of the trusts until the date of his death. The initial life beneficiary was the decedent's adult son. Eighty percent of the trust income was normally payable to the son, with the balance added to principal. Subsequent beneficiaries were the son's widow and his issue. The trust instruments contained powers in Article 4 and Article 7. Article 4 permitted the trustees in their absolute discretion to increase the percentage of income payable to the son when needed in case of sickness or desirable in view of changed circumstances. The trustees could also cease paying income to the son and add it all to principal during such period as they decided the stoppage was for his best interests. Article 7 gave the trustees broad administrative powers, including discretion to acquire investments not normally held by trustees and authority to determine what was to be charged or credited to income or principal. It further empowered the trustees generally to do all things in relation to the trust fund which the donor could do if living and the trust had not been executed. The government claimed that the powers in the two articles required inclusion of the trust corpus in the decedent's estate. The executor disputed this position after paying the tax and seeking recovery. The district court had ruled against the executor on the stipulated facts, leading directly to the appeal.
View caseRoland Rhodes sues in federal court alleging tortious interference with a revocable living trust that named him beneficiary. The defendant moves to dismiss under the probate exception. The court dismisses the claim because it would require determining the validity of the trust instrument itself.
Vickie Lynn Marshall, also known as Anna Nicole Smith, met J. Howard Marshall II in October 1991 and married him on June 27, 1994. J. Howard died on August 4, 1995. Although he had given Vickie substantial gifts and money during their relationship, his will made no provision for her. Vickie maintained that J. Howard had intended to secure her future through a catchall trust. Respondent E. Pierce Marshall, one of J. Howard’s sons, stood as the sole ultimate beneficiary under his father’s estate plan, which consisted of a living trust and a pourover will directing all remaining assets into the trust. In January 1996, while J. Howard’s estate remained subject to probate proceedings in Harris County, Texas, Vickie filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Central District of California. In June 1996 Pierce filed a proof of claim in that bankruptcy case asserting that Vickie had defamed him through statements made to the press shortly after J. Howard’s death. Vickie answered and asserted a counterclaim alleging that Pierce had tortiously interfered with her expected gift by imprisoning J. Howard against his wishes, surrounding him with hired guards, making misrepresentations to him, and transferring property contrary to his expressed intentions. The Bankruptcy Court granted summary judgment to Vickie on Pierce’s defamation claim. After a trial on the merits it entered judgment for Vickie on her tortious interference counterclaim and awarded her more than $449 million in compensatory damages, less any amount recovered in the Texas probate action, plus $25 million in punitive damages. Pierce then moved to dismiss for lack of subject-matter jurisdiction, arguing that the claim belonged exclusively in the Texas probate proceedings. In the Texas Probate Court, Pierce sought a declaration that the living trust and will were valid. Vickie initially challenged the instruments and asserted her own tortious interference claim there but voluntarily dismissed both claims after the Bankruptcy Court’s judgment. Following a jury trial the Probate Court declared the trust and will valid. On review of the Bankruptcy Court’s judgment the District Court rejected the probate-exception argument. The court adopted the Bankruptcy Court’s findings with supplements. It awarded Vickie approximately $44.3 million in compensatory damages together with an equal amount in punitive damages. The Ninth Circuit reversed. It held that the probate exception barred federal jurisdiction because the claim raised questions ordinarily decided by a probate court and because the Texas Probate Court had asserted exclusive jurisdiction over all of Vickie’s claims. The Supreme Court granted certiorari in 2005.
View caseNo. Marital property transferred to a revocable living trust remains marital property. The transfer affects only legal title and management, not the underlying ownership interests between spouses.
The capacity required is the same as that needed to execute a will. A settlor must understand the nature of the property and the disposition being made.
A pour-over devise adds probate assets to an inter vivos trust or funds a trust whose terms were executed during the testator's lifetime. The trust then distributes the combined assets according to its terms.
Only assets properly transferred into the trust during life avoid probate. Assets outside the trust pass through the will or intestacy unless a pour-over provision captures them.
…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…