Sometimes a gift is given without any expectation of the money coming back to you. At other times, though, it can be a gift with asterisks. This means there are conditions to it. Such is also the case with investment gifts, too. Enter revocable trusts.
This kind of trust allows a grantor—that is, the person offering the asset—to change or cancel it if he or she wishes, or if certain requirements have not been met. In addition, it allows the grantor of the asset to earn income from it while alive, knowing that full ownership will transfer to the beneficiaries at the time of his or her death.
The trust is set up much like an irrevocable trust, though whether the trustee controls it during the grantor’s life or starts controlling it when the grantor dies, is dependent on the terms of the arrangement. In addition, because a revocable trust is intended for one or more beneficiaries, it can avoid probate court. Regardless, the trustee can get an EIN online or check the status of the EIN online when setting up the trust.
There are other advantages, too, such as allowing for the use of the money to pay for the grantor’s health treatment as they get older, with the trustee being in charge of these expenditures. Also, in the case of beneficiaries who are not yet adults, the grantor can make smaller amounts of money available periodically to the beneficiaries to ensure they do not use it all before the grantor is deceased.
The disadvantage of this kind of trust is that it is costly and complicated to manage, and requires constant updating and tax filing in the time up to the grantor’s death. In addition, there are no tax benefits derived from such a trust, and creditors can still come after the grantor’s money.
As with any legal arrangement, make sure you consult with a qualified attorney before taking on a new plan of action with your finances.