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What is a Living Trust?
Features of a Revocable Living
Trust
Keeping Tax and Asset Records
Income Tax Effects and Returns
Titling Trust Assets
Withdrawals or Payments from the Trust
Simply put, a living trust is a written agreement between
two parties. The trustor or grantor establishes the trust
and the bank, person, or persons who manage it, is the
trustee or trustees
The trust agreement
details how the trust operates during the grantor's life and
what happens to the assets following his or her death. Extreme
care must be taken when considering the elements of the trust,
and the written agreement that describes its operation will
specify in detail who receives the assets when the trust terminates,
any payments that can be made from the trust, and who will serve
as trustee and successor trustee.
Features of a Revocable Living Trust
As long as the grantor survives, the trust is a revocable
trust. During this period, the grantor may amend the trust
in any way he or she wants, can add or subtract to existing
assets, buy and sell any of the assets held by the trust, or
even revoke it. A trust amendment, signed by the grantor, will
indicate any changes made to the original trust.
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Keeping Tax and Asset Records
There is no legal requirement to keep any records of the
trust while the grantor is alive and the trust is revocable.
While the trust typically will include a list of assets
originally placed in the trust, any additions or subtractions
should be included because when the grantor dies, the
successor trustee needs to know exactly what the trust
contains.
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Income Tax Effects and Returns
No separate tax return is required for the trust as long as
the grantor serves as its trustee or co-trustee and the trust
is revocable.
The trust will carry the Social Security Number of the trust's
creator, who will continue to report all taxable income and
deductions on his or her personal tax return, including all
dividends, capital gains, interest, and other taxable income.
No reference to the trust is required on the personal tax return,
and none should be made.
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Titling Trust Assets
Assets need to be placed in the trust for it to function or
serve any practical effect. To do this, the assets must be registered
in the name of the trustee. As an example, the title or registration
of an asset would be changed to "Ann B. Smith, trustee
of the Ann B. Smith Trust, dated September 1, 2003."
If real property is included in the trust, any deeds that are
assigned to the trust need to have their title recorded, a process
that does not trigger a real estate tax reassessment. Stock
certificates need to be re-recorded and mailed to transfer agents,
and a similar process is required for any bonds. Banks, credit
unions, and saving and loan associations need to have their
accounts changed, and stock brokerage accounts must be transferred
to the trustee, in his or her name for those assets to be included
in trust.
To make the trust the beneficiary of any existing life insurance
policy, the policy needs to be changed to name the trustee as
beneficiary. Doing so will place the proceeds of the policy
into the trust at the time of the insured's death.
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Withdrawals or Payments from the Trust
Since the trust is revocable during the grantor's life,
he or she may withdraw whatever amount is wanted at any
time, without limit. There is no legal need to keep records
of any interest, dividends, or principal taken, or for
any amounts withdrawn from bank, credit union, or savings
and loan accounts.
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or lawyer in accordance with other states' laws. The Mamola Law Firm, APC is not currently licensed to practice in the
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