All posts tagged: settlor

Testamentary Trusts – Trusts When You Can’t Be There

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More trusts?  Yes, but only a little bit more.  So far, we’ve discussed only trusts that can be established during the grantor’s lifetime.  This entry concerns trusts that only come into existence once the grantor is deceased. A testamentary trust is a trust created by a person’s will.  No will, no testamentary trust.  The person creating it is the testator, not the grantor.  A grantor sets up a trust during his or her lifetime.  Here, where the trust is established after death, it is established by a person who executed a will – a testator.  To do, the testator’s intent to set up the trust must be clear in the testator’s will.  This is important –  if the intent to create a trust or to grant powers to a trustee in the will is not clear, then there will be no trust. Testamentary trusts can be used for tax purposes, or they can be used for other purposes, such as making a gift to someone under a will who is under some legal incapacity, e.g.: …

Forever ever? Irrevocable trusts, gifts and taxes

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Our last entry provided a high-level overview of revocable trusts, their benefits and shortfalls, and when they are a valuable addition to an estate plan or to wealth management. Sooooooo, is there an irrevocable trust? There is.  An irrevocable trust is trust where the grantor (or trustor or settlor – same thing) does not reserve the right to amend or revoke the trust.  As we noted earlier in our discussion about revocable trusts, trusts in Texas are presumed to be revocable unless they specifically deemed to be irrevocable. Irrevocable sounds kind of permanent.  Why use one? Taxes. If the grantor gives up a sufficient degree of control over the assets placed into the trust, the tax liability falls onto the trust or its beneficiaries (depending on how it’s set up) and not on the grantor of the trust.  That’s horrible, you say.  Not really.  A grantor does this sort of planning when there is no question that any income generated by the assets is going to be taxed. An irrevocable trust is a separate entity …

REVOKED! Who Needs a Revocable Trust?

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Earlier, we discussed how revocable trusts didn’t carry the same tax benefits of irrevocable trusts.  If the tax benefits aren’t as robust, then why use them?  Wasn’t that the point of a trust in the first place. Sure. That’s one advantage of a trust.  There are others, such as control and flexibility.  And that’s where a revocable trust proves its mettle. A revocable trust is a trust which the trustor (or grantor or settler – I use them interchangeably) has the right to revoke the trust and revest in herself full title to the property of the trust estate.  Essentially, the person who created the trust and placed the property in the trust (transferring title in the property from herself to the name of the trust) can pull that property out of the trust and once again have the property in her own name.  In some cases, the beneficiaries of the trust can be the persons to revoke the trust, but more on that another time. If you remember exchanging toys or turns in games …