Revocable Trusts

Question 1

Revocable trust

Answer 1

(also called living trusts or inter vivos trusts)

created during the lifetime of the settlor

revocable and amendable.

may continue beyond the settlor’s lifetime.

Question 2

Trust property

Answer 2

There must be trust property before a trust can exist.

Many settlors will fund the trust immediately. Accordingly, names on bank accounts, brokerage accounts, securities, deeds to real property, and other assets to be transferred to the trust must be changed to reflect the new owner, i.e., John M. Doe, Trustee of the John M. Doe Revocable Trust U/A xx-xx-xx.

Although assets with a title must be changed, there are many types of personal property owned by the settlor that do not have a formal title, i.e., clothing, household goods, etc. A general assignment may be used to transfer these assets into the trust.

Question 3

Pour-over will

Answer 3

provide that all assets in the settlor’s name at his or her death are bequeathed to the trustee of the revocable trust.

Once the assets in the decedent’s name are conveyed to the trust they are disposed of pursuant to the trust’s terms.

For the trust to be a valid pour-over trust it must be identified in the testator’s will and its terms set forth in a written instrument that is executed before or concurrently with the execution of the testator’s will or in the valid last will of a person who has predeceased the testator

Question 4

Trust beneficiaries

Answer 4

An express trust must have at least one existing and identifiable beneficiary.

may be any number of beneficiaries, including the settlor.

Question 5

Trustee

Answer 5

Once a trust is validly created, it will not fail because of a lack of trustee, either because one is not named, or because the trustee dies or otherwise becomes incapacitated.

Similarly, where property is transferred inter vivos to a trustee without his knowledge, and the trustee, upon learning of the trust, renounces the trust, the trust does not fail. If necessary, the court can appoint a trustee.

Question 6

Oral trust

Answer 6

According to K.S.A 58a-407, a trust can be created orally and is not required to be evidenced by a trust instrument.

A trust concerning land may not be created orally; it must be in writing. K.S.A. 58-2401.

An oral trust of personal property, however, is enforceable even though it is contemplated that it will be converted into realty.

Question 7

Totten trust

Answer 7

(also: tentative trusts or savings account trusts)

created by an individual depositing money into a bank, savings and loan, or credit union account

depositor as “trustee” for certain named beneficiaries.

depositor retains the power to withdraw any or all of the principal or income from the account or to otherwise revoke the trust.

The trust beneficiaries’ right to the trust funds does not arise until the depositor’s death.

Question 8

Revocable - income tax treatment

Answer 8

If the settlor is treated as the owner of the trust, then the trust is disregarded as a taxable entity.