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Revocable Living Trusts

Revocable living trusts are one vehicle to tranfer an estate to heirs, and in some cases, a living trust may reduce estate tax liability as well. An individual (the Grantor) creates a trust for his or her own benefit with the Grantor as the Trustee (or the Grantor and spouse or child as Co-Trustees). The grantor is entitled to income and principal during his or her lifetime, and the Grantor may change, amend, or revoke the trust. A successor Trustee is named in the trust to manage the trust assets in the event of the Grantor's incapacity and to administer the trust upon the Grantor's death. When the Grantor dies, the trust assets are distributed according to the provisions of the trust. Assets are typically distributed outright to the beneficiaries; however, assets may be held in trust for minor children or in trust for the spouse for estate tax reasons.

Reasons for creating a revocable trust:

Assets held in a trust will avoid probate. Depending on the size of an estate, a probate proceeding may be simple and inexpensive, or a proceeding may be costly and time-consuming. The reasons to create a trust to avoid probate include:

  • The individual owns many assets. The complexity of an estate may increase the time and cost of probate.
  • The individual's property is complicated to administer. For example, the individual owns real estate in another state.
  • The individual anticipates an heir may challenge or contest his or her will, or the individual's heirs are impossible or difficult to locate.

Irrevocable Trusts

Irrevocable Trusts, which also avoid probate, are created for additional purposes including asset preservation and tax planning. Common types of irrevocable trusts include income only irrevocable trusts, life insurance trusts, and charitable remainder trusts.

Testamentary Trusts

A testamentary trust is created under a will and does not come into existance until death. This type of trust allows the decedent to determine the time and manner in which beneficiaries receive assets. Testamentary trusts are often created for minor children and for spouses for estate tax reasons.     

The information in this site is for general purpose only.
You should consult a qualified professional for specific recommendations appropriate to your individual situation.
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