Revocable Inter-Vivos Trusts

Question 1

MAIN REQUIREMENT

Answer 1

• The settlor cannot be the sole beneficiary when also named the sole trustee

If settlor is the sole beneficiary and the trustee –> merger –> fee simple

Question 2

Reasons to have a revocable lifetime/inter-vivos trust?

Reasons NOT to have a revocable inter-vivos trust?

Answer 2

PROS

• manages assets efficiently
• helps plan for possible incapacity by avoiding a guardianship proceedings
• avoids probate

CONS

• does not avoid taxes
• if a settlor keeps an income interest, or keeps a power to revoke, the FULL trust assets will be included in the settlers gross estate for federal estate tax purposes

Question 3

Is a trust automatically revocable?

Answer 3

NO– ALL NY TRUSTS ARE PRESUMED IRREVOCABLE –> MUST EXPLICITLY STATE THAT IT IS REVOCABLE

NOTE: express ability to revoke generally means you also have ability to modify