Coordinating the Revocable Life Trust

Coordinating the Revocable Life Trust

No tool or technique, no matter how useful, should be employed in a vacuum. For this reason, coordinating the revocable life insurance trust must be meshed with the overall estate plan. Therefore, the planner must consider the following when suggesting the use of a revocable trust (no matter how it is to be funded). Importance of a Will in Coordinating the Revocable Life Trust A will is necessary in almost every estate plan for many…

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Creditor Implications of a Revocable Life Trust

Creditor Implications of a Revocable Life Trust

It is a delusion to think that a client protects himself or his beneficiaries from creditors by placing assets in a revocable trust. The avoidance of probate does not equate to the avoidance of creditor implications. Creditors clearly have access to the assets in a revocable life insurance trust until and unless the client dies or for some other reason the trust becomes irrevocable. All states currently allow creditors access to any asset the client…

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Income Tax Implications of a Revocable Life Trust

Income Tax Implications of a Revocable Life Trust

For most income tax purposes, there is no significant impact when assets are transferred to a revocable living trust. The client must report trust income, losses, deductions, and credits as though they were personally incurred. No fiduciary income tax return need be filed if the client who establishes the trust is also the trustee. (This suggests that the grantor of a revocable trust should be the trustee or co-trustee). This tax theory that the revocable…

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Gift Tax Considerations of a Revocable Life Trust

Gift Tax Considerations of a Revocable Life Trust

There are only a few gift tax considerations with respect to revocable trusts. But they can be significant, and understanding them will help you make a more educated, and better, financial and policy decision: No gift until the client gives up power to revoke – A direct gift of an asset from a client to a revocable trust will not cause any gift tax consideration, because the client has never parted with dominion and control…

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Estate Tax Implications of a Revocable Life Trust

Estate Tax Implications of a Revocable Life Trust

There are a number of estate tax implications that must be considered with respect to revocable life insurance trusts. One concerns the inclusion of trust assets. A second relates to the taxation of proceeds from policies owned by a third party but payable to the revocable trust. A third concerns the mechanism through which policy proceeds payable to a revocable trust can be used to provide estate liquidity. General estate tax inclusion issues – Picture…

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Selection of a Trustee in a Revocable Life Trust

Selection of a Trustee in a Revocable Life Trust

With the selection of a trustee, the major attributes to consider are the trustee’s willingness to serve and at what cost; the trustee’s experience with trust, financial, business, accounting, and tax matters; the trustee’s temperament and relationship with the beneficiaries; and the tax effects of serving as trustee. There are important tax considerations that go into the selection of a trustee. The grantor must consider whether a particular family member or related person can serve…

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We Can be the Beneficiaries of a Trust?

We Can be the Beneficiaries of a Trust?

Beneficiaries of a trust receive income from trust assets and/or principals at the ages and under the terms specified in the trust document. They can (and often do) include the person who established the trust. The first people to receive distributions are called primary beneficiaries. The class of beneficiaries who receive what remains when a trust terminates are called remainderpersons. Although beneficiaries do not have to be identified by name, or even all exist at…

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The Job of the Trustee in a Revocable Life Trust

The Job of the Trustee in a Revocable Life Trust

The job of the trustee involves responsibility for safeguarding and investing the assets in the trust and making payment as directed (or if given discretion, as appropriate under the guidance provided in the trust) to the named beneficiaries. This responsibility may run for as short as a few years or for generations. Any natural person with the legal capacity to take and hold title to the property and deal with it or any corporation authorized…

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Role of the Trust Document in a Revocable Life Trust

Role of the Trust Document in a Revocable Life Trust

Sometimes called a “trust indenture” or “trust agreement,” this document sets forth the agreement between the parties (and serves as evidence for the other parties in interest in every trust agreement, the federal and state taxing authorities) and spells out: Learn more about Revocable Life Trusts. Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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