Get Announcement 2001-24 - Election To Treat Trust As Part Of An Estate; Hearing. Election To Treat

Unlike testamentary trusts, which are created under the terms of a will and take effect after death, living trusts are established during one's lifetime. They can continue operating after death or end at that time with instructions to distribute the assets directly to the beneficiaries.

For instance, if a revocable trust has two grantors, it may still remain revocable until all these people have passed away. However, the deceased person's outstanding debts from the revocable trust do not go away, and creditors will still be entitled to the assets listed in the document.

Outright Trust Distributions They consist of the trustee releasing each beneficiary's inheritance without any restrictions. Outright distributions can either be made as a single lump sum, or periodically. Prior to making outright trust distributions, the trustee will need to pay the trust's debts and taxes.

No trustee will be available to manage the trust or make a claim against it. In such cases, beneficiaries will need to go to court to resolve the matter, and it may be time consuming and difficult to get it resolved. The will equivalent to the trustee is the executor.

If the beneficiary of a trust or will passes away, the person who established the trust or will is required to amend their estate plan. The estate plan will still be in effect if this occurs. There are two paths for the inheritance to take when naming beneficiaries for an estate plan when a will or trust is created.