A revocable trust is a type of trust that allows the grantor to modify or revoke it at any time. This is the main distinction between a revocable trust and an irrevocable trust, which can be created for certain tax planning purposes. Generally, a revocable trust will enable the grantor to receive all of the advantages of the trust's assets during their lifetime. After their death, the assets of the trust are distributed as indicated in the terms of the trust.
No, revocable living trusts do not usually reduce wealth taxes. Since the grantor maintains control of an active, revocable trust and can alter or cancel it at any moment, all assets in the trust are still considered the property of the grantor. Therefore, the grantor must declare the trust's income on their personal income tax return instead of filing a separate tax return for the trust. Irrevocable trusts, on the other hand, remove assets from your taxable estate and can therefore help reduce your estate taxes (if you are subject to them in the first place).
A revocable living trust has many benefits, such as allowing you to make changes or amendments to the trust document while you are alive, at your own discretion. It also allows you to transfer property without having to go through probate court. However, there are some drawbacks to a revocable living trust. Since you retain control of the assets in a revocable living trust, it does not provide any estate tax planning advantages.
Additionally, since you retain control of the assets in a revocable living trust, you must declare all income from those assets on your personal income tax return. In summary, a revocable living trust can be an excellent tool for estate planning and asset protection. It allows you to make changes or amendments to the trust document while you are alive and transfer property without having to go through probate court. However, it does not provide any estate tax planning benefits and all income from assets in a revocable living trust must be declared on your personal income tax return.