What Does a Lawyer Need to Set Up for a Revocable Trust?
To create a revocable trust, an attorney needs to draft the trust document and have his client sign it. Most states do not require the document to be filed with any government office to be effective. Some states issue formal documents, such as a Declaration of Revocable Trust. In every case, however, the contents of the trust document include certain basic features. A trust document will normally be considered revocable unless it states that it is irrevocable.
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The Grantor
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The grantor is the person who sets up the trust and whose assets are poured into it. In a revocable trust, the grantor may revoke or amend the trust at any time, but may not recover amounts already distributed to beneficiaries. The grantor can be an individual or a legal person such as a corporation, but is often an individual who wishes to control the distribution of his assets to beneficiaries without subjecting them to the delays of the probate process. The grantor must be named in the trust document and must sign it.
The Trustee
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The trustee is the person who administers the trust assets on behalf of the beneficiaries, normally in exchange for a fee paid out of trust assets. The trust document should name a trustee and an alternate trustee in the trust document after their permission has been obtained, and the trust document should clearly spell out the trustee's authority with respect to trust assets. Many grantors give trustees the right to invest trust assets. Attorneys and banks are often selected as trustees.
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The Beneficiaries
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Either individuals or legal persons may be named as beneficiaries. Beneficiaries should be named in the trust document. Alternate beneficiaries should also be named in case a beneficiary dies or, in the case of a corporate beneficiary, goes bankrupt. Since beneficiaries will be taxed on income they receive from the trust, take care to ensure that their distributions will not kick them into a higher tax bracket. In many cases, assets are kept in the trust as principal, and interest is distributed to beneficiaries.
The Assets
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The trust document should clearly list the trust assets. Although the grantor may transfer titled property (such as real estate, automobiles or bank accounts) into the name of the trust, this is not necessary for a revocable trust and might even give rise to a presumption that the trust is irrevocable if the trust document does not state otherwise. Assets may be distributed in full upon the death of the grantor, or distributed gradually before and after the death of the grantor.
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References
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