Taxation Of Revocable Living Trust At Death
Revocable living trusts have become a popular alternative to the traditional way to pass property on when you die. It legally evades a probate system which is expensive and protracted. Many citizens are attracted by the possibility of quicker and easier asset transfers.
A revocable living trust is an arrangement you make for management and distribution of your property. Like a will, the trust is "revocable," meaning that you can modify or eliminate it at any time.
Any competent adult can create a revocable living trust. It can be done jointly by husband and wife keeping their separate property assets in different accounts. The trust requires the appointment of a trustee to administer the trust. The grantor of grantors can themselves be the trustees. It must also contain detailed instructions as to how the assets in the trust are eventually to be disposed of. The ownership of all the assets represented in the trust must legally be transferred to it or the trustee as its administrator. A revocable living trust avoids the probate process because you collect your assets and transfer them to the trustee before you die. If you fail to do this, you will not avoid probate.
A revocable living trust does not avoid income, estate or gift taxes. Standard provisions for saving estate and gift taxes can be included in a revocable living trust or a will. And a federal estate tax return still must be filed after you die if the net estate exceeds a certain value. In 2009, gross estate values amounts to $3.5 million.
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