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Revocable Trust
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Definition
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A contract entered into between the property owner (grantor) and a trustee who
agrees to manage the trust property.
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When Does It Apply?
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Effective when signed. Property usually is contributed to the trust. This is
unlike a trust in a will (testamentary trust), which is effective only upon
death.
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How Does It Operate?
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Trustee holds title to trust property and manages it for the trust
beneficiaries. Income and/or principal can be distributed to them.
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Advantages/Disadvantages
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Advantages - minors and other handicapped persons can have property
managed for them in trust. Probate in other states is avoided if property is
held in trust.
Disadvantages - expense and effort in setting up a managing trust.
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Estate/Gift Tax Implications
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All trust property is included in the taxable estate.
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Income Tax Implications
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All income is taxed to the grantor at his or her tax rate.
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Other Considerations
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Trustee held to a high standard of care. Grantor may amend or revoke this trust
or remove property from it.
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