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A Trust is created when one person (the Trustor or Grantor) transfers to
another person or corporation (the Trustee) a property interest to be
held for the benefit of himself or others (the beneficiaries).
If the Trust is created during the Trustor's (the person creating the
trust) lifetime, rather than in his Will, it is an Inter-Vivos or Living
Trust. When the Trustor retains the right to dissolve the Trust
arrangement, it is a Revocable Living Trust. NOTE Assets in a Revocable
Living Trust are included in your gross estate for Federal Estate Tax
purposes.
What are some advantages?
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Assets in the
Trust are not subject to probate administration. This saves
executors' and attorneys' fees. It also grants more privacy as to
who gets the estate, when they get it, and how much they get.
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Professional
management is available if the Trustor becomes incompetent,
disabled, or wants to be free of the worries of management.
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Should the
Trustor (also usually the original Trustee) die, the Successor
Trustee can step in and manage the estate without delay or red-tape.
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Annual
court accountings, with accompanying legal fees are not required,
although some states do not require annual accountings for
Testamentary Trusts (Trusts created within a Will) either.
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A Trustee can
collect life insurance proceeds immediately after the Trustor dies
and can use the proceeds to care for family members without any need
for court approval.
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A Successor
Trustee can be in another state without problems.
What are some
disadvantages?
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Creditors may
not be cut off as quickly as they are in probated estates.
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A little more
effort is required to transfer assets into the Trust and records
should be kept for transactions by the Trustee.
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An attorney
usually charges a higher fee to establish a Living Trust than to
establish a Testamentary or Will Trust.
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Annual tax
returns may be required if the Trustee is someone other than the
Trustor.
 
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