Revocable Living Trusts
A revocable living trust is one that is established during the estate owner's lifetime. This type of trust allows the grantor control over the trust assets, and the ability to change or terminate the trust at any time. Because of this, its use will not keep the trust assets out of the gross estate, and therefore, will not reduce federal estate tax. However, provisions can be included in the trust to minimize federal estate tax, such as utilizing the applicable credit amount at the grantor's death.
Perhaps the most common reason to establish a revocable living trust is to avoid the expense and delay of probate. These costs vary greatly and may not be substantial, but it may be important to the estate owner to reduce or eliminate them. However, before a revocable trust is established, the estate owner should consider costs such as the attorney's fees for drafting the trust and any possible trustee fees for managing the trust.
Another reason to establish a revocable living trust is asset management. The estate owner may become disabled or doesn't want to bother with the worry of managing the assets. In addition, after the estate owner's death, the trust beneficiaries may not have the expertise to manage the assets of the estate. In both of these cases, the professional trustee can manage the trust assets.
Typically a revocable trust includes provisions that:
- Distribute trust income to the grantor during lifetime;
- Make use of the applicable credit amount at the death of the first spouse; and
- Ultimately pass trust property to the children or other estate beneficiaries according to the grantor's objectives.
State Farm Life Insurance Company
(Not Licensed in New York or Wisconsin)
State Farm Life and Accident Assurance Company
(Licensed in New York and Wisconsin)
Home Office, Bloomington, Illinois
IL - 35