Transferring Living Trust Property To Beneficiaries

People establish a revocable living trust knowing that one day they will pass away, and in earnest hope that their estate will pass on to the beneficiaries exactly as they had imagined and wished. In more than ninety percent of the cases this is exactly what happens, but there are always anomalies and events that occur that could not have been foreseen all these years before. Strangely enough the larger the size of the estate the more the problems involved, and some of them can be both delicate and sensitive and requiring high levels of legal astuteness to see the trust fund safely arrive at their goals.

A living trust can have three types of beneficiaries as follows:
  • Primary Beneficiaries: These are the beneficiaries, usually children or direct family, who are designated to receive either a specific property or a percentage share of the trust's overall assets.
  • Alternate Beneficiaries: These are the beneficiaries, usually grandchildren or nephews or nieces, who will receive one of the named primary beneficiaries share of the estate if the primary beneficiary passes away before the trustors.
  • Residuary Beneficiaries: These are the beneficiaries that will receive any assets or properties not designated to primary or alternate beneficiaries. If any or all of your children are to be your sole beneficiaries and yet underage at the time of establishing the trust, you can arrange for their share of the trust to be assigned to an adult trustee to manage and protect their interest till the become of legal age, or more commonly, when they reach the age of 21.

If one of your children approach you to ask for a loan from the living trust this is possible. The condition that the loan needs to be repaid with interest. However there are circumstances that will allow the loan to be repaid when the trust is dispersed. The same can also apply to college fees.

If the assets of revocable living trust begin to creep up to fantastic proportions and there is an almost certain inevitability that exceptionally high levels of estate tax will levied on the estate before it can be distributed to the beneficiaries. This where the finest minds in estate planning will be called to the test, and in the process earn very respectable fees. However they will only be the smallest percentage of what the trustors will be obliged to pay in estate taxes.

First of all, the trustors can, and probably will, take full advantage of federal gift tax. This means that the can each gift $12,000 per person each year with out having to pay income tax. They can dish out as much money as they can through this means in an effort to reduce the value of their estate. If giving away money doesn't work the next stage is to get start allocating property to the beneficiary's outwith the estate.

This can be done by even going as far as establishing a specific company or even a corporation to handle the transfer a property whose equity value is calculated and split into units of $12,000. The trustors can then transfer the units to their named beneficiaries every year until it has been wholly transferred.

This is obviously an expensive process but again justifiable when considering the savings in estate tax possible.

All in all the revocable living trust system has been set up so that the trustor can enjoy the benefits of the trust's assets during their life time, and principally that their beneficiaries will be able to take full advantage of their life's work in the next. By taking these full careful steps there is no reason why this shouldn't happen.