Also known as: revocable living trust · revocable trust · living trust · RLT · revocable inter vivos trust
Written by attorneys — see sources below.
A trust created by a settlor during life that remains subject to the settlor's power to revoke or amend until death. The settlor retains full control over the trust property and may direct the trustee's actions. Capacity to create, amend, or revoke the trust equals the capacity required to execute a will.
Rowan Russell, while hospitalized, executes a revocable living trust naming her nephew as trustee and directing distribution of her business interests at death. Her siblings contest the trust on grounds that Rowan lacked capacity. The court applies the same standard used for wills and upholds the trust because Rowan understood the nature of her assets and the disposition she directed.
Roger Ramirez creates a revocable living trust and transfers substantial assets into it before death. After his passing, a state probate court issues a decree characterizing the trust assets. In subsequent federal estate-tax litigation, the federal court refuses to treat the state decree as binding because the United States was not a party to the state proceeding.
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 caseRyan Roberts funds a revocable living trust and later amends it to change remainder beneficiaries. Following his death, a state trial court determines the validity of the amendment. In a later federal tax controversy, the federal agency declines to treat the state adjudication as conclusive because the United States was not joined as a party.
In 1930 a New York resident created a revocable trust that was amended in 1931. The trust directed income from the corpus to his wife for life. It also granted her a general power of appointment. In default of appointment half the corpus passed to the decedent's heirs and half to the wife's heirs. In 1951 the wife executed an instrument that purported to release the general power and convert it into a special power. The decedent died in 1957. His estate claimed a marital deduction for the widow's trust on the federal estate tax return. The Commissioner disallowed the deduction under section 2056(b)(5) of the 1954 Code and assessed a deficiency. The estate petitioned the Tax Court for redetermination. While that proceeding was pending the estate obtained a New York Supreme Court decree declaring the 1951 release a nullity. The Tax Court accepted the decree as controlling and allowed the deduction. A divided Second Circuit affirmed. The companion case involved the estate of a Connecticut decedent who died in 1958. His will directed payment of estate taxes without proration and created a residuary trust granting his wife a general testamentary power of appointment. The Commissioner disallowed part of the marital deduction. The executor then obtained a probate court order applying the state proration statute. The District Court refused to treat the probate decree as binding on federal tax questions. The Second Circuit agreed the decree was not conclusive. The two cases reached the Supreme Court after the Second Circuit panels reached differing conclusions on the effect of the state decrees. Certiorari was granted to resolve the conflict among the circuits.
View caseNo. Property acquired during marriage remains marital even after transfer into a revocable living trust. The trust form affects only legal title and management, not the underlying marital character of the asset.
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Yes under the majority statutory approach. Divorce revokes any revocable disposition or fiduciary nomination in favor of a former spouse unless the instrument, court order, or property agreement expressly preserves the designation.
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No. Because the settlor retains the power to revoke, the assets pass outside probate directly to the designated beneficiaries upon the settlor's death.
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Yes. Courts treat such trusts as illusory transfers, allowing the surviving spouse to include the trust assets when calculating the elective share.
…Upon the decedent’s death the benefits under said policy were paid to LaFrance. : Maryland Estates and Trusts Code Ann. § 4-411 (1974), reads: “A legacy may be made in form or in substance to the trustee in accordance with the terms of a written inter vivas trust, including an unfunded life…