Which statement best describes a revocable trust?

A revocable trust is characterized by the fact that the settlor, or creator of the trust, retains the ability to modify, amend, or completely revoke the trust during their lifetime. This flexibility allows the settlor to change the terms of the trust or to dissolve it altogether if their circumstances or intentions change. This aspect of revocability is crucial for estate planning, as it allows the settlor to maintain control over the assets placed in the trust until their death or until they decide to revoke it.

The other options do not accurately capture the essence of a revocable trust. While it's true that some trusts may provide asset protection from creditors, revocable trusts do not have that characteristic; since the settlor retains control, they do not provide the same level of asset protection as irrevocable trusts. Additionally, revocable trusts are generally included in the settlor's taxable estate, meaning the assets are subject to taxes, contrary to what is suggested in one of the options. Finally, the statement that the settlor cannot alter the trust is inherently incorrect, as it contradicts the defining feature of a revocable trust.