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REVOCABLE
LIVING TRUSTS A
revocable trust is a relationship that is created during the lifetime of the
grantor in which one party, the Trustee, holds property for the benefit of the
grantor. Benefits:
It allows the grantor to provide for contingencies such as incompetence
or other inability to manage his or her own property; it also provides for a
smoother transfer of property at death. The
trusts asset(s) are not transferred through probate but they are subject to any
applicable death taxes. Concerns:
There are few concerns since
the trust is revocable and may be changed or terminated at any time prior to the
grantor’s death; however, one concern is that the grantor, who is also the
beneficiary of the trust during his or her lifetime, may become incompetent and
the successor trustee named will then be charged with administering the trust to
meet the needs of the grantor of the trust during the period of incompetency.
In
this situation, the grantor of the trust will want to be sure that the person he
or she appoints as successor trustee, (very often it is the spouse or a child),
will carry out the wishes of the grantor and perform the duties set forth in the
trust with fidelity. Tax
advantages:
There are no real tax advantages since the grantor will be treated as the
owner for income tax purposes; also the trust assets will be included in the
grantor’s taxable estate at death. NOTE:
The fact that there are no tax advantages to having a revocable living
trust is a point that is often not
specified in presentations by companies that sell packaged
revocable trusts and that emphasize avoiding probate as the “be all
and end all” of estate planning. There
are benefits but they often do not outweigh the costs.
A durable power of attorney can allow the selected individual to manage
assets during a period of incapacity. Process:
The trust must be established and operated in accordance with local law.
Competent council must also be consulted. Ó 2000 James
W. Pearson, Jr., All Rights Reserved FOR ADDITIONAL INFORMATION CALL THE TOLL FREE HELP LINE 1-800-232-1477 E-mail: lawyer@lawwalk.com JAMES
W. PEARSON, JR. Chair of the Federal & State Credit Union Department & Coordinator of legal consultations under the Family Legal Care Plans offered to credit union members. |
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