The revocable inter vivos trust is the basic document used in modern estate planning. The trust allows real property (land) and personal property (everything else) to pass according to your wishes. Trusts require four basic things: property (either real or personal or both), known as the trust estate; owners, variously known as trustors, settlors, or grantors; managers, known as trustees; and recipients, known as beneficiaries. Beneficiaries are further divided into current (or present) beneficiaries, and contingent (or remainder) beneficiaries.
As an example, assume that John and Jane Smith are married, and have two children. They create a revocable trust, and transfer all of their property into it. They are simultaneously the trustors, trustees and current beneficiaries. Their property is their trust estate. Their children are (probably) their contingent beneficiaries.
The revocable trust allows John and Jane to make plans about their future. Or, to say it another way: John’s and Jane’s primary purposes in creating a trust are:
- To provide for their care and maintenance while living
- To manage their trust estate in cases of incapacity
- To transfer their trust estate to their beneficiaries at death
- To reduce or postpone taxes that may come due on the death of either or both of them
It is important to remember that each trust should be tailored to the needs of the couple who created it. This is equally true for the single person, although many of the tax advantages available to married couples are reduced if not eliminated for singles.
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