7. For which of the following reasons would a grantor fund an inter vivos revoca

Question

7. For which of the following reasons would a grantor fund an inter vivos revocable trust?

I.     Shift income tax liability

II.    Reduce estate tax liability

III.   Reduce exposure to probate

a. 1&2

b. 2&3

c. 1&3

d. 3 only

9. When income is taxable to the grantor trust rules, the attorney who drafted the trust definitely made a mistake. T/F

10. Which of the following is not a tax consequence associated with a defective trust?

a. The income tax is shared by the trust and the trust beneficiaries.

b. The Grantor is subject to income tax.

c. For gift tax purposes, a gift into this trust is complete.

d. The trust assets are removed from the Grantor’s estate

Explanation / Answer

7 Answer is d. 3 only that is to Reduce exposure to probate.

Reason: The main motivation for establishing the inter vivos revocable trust is to reduce the exposure to probate of one's estate at death. If the somebody's property is held in his trust then those trust assets will not be subject to probate upon his/her death.

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