Also, the trust is a convenient management vehicle, which is particularly important if the elderly client becomes disabled or experiences poor health. Finally, clients owning real estate outside their home state will find that titling real estate in a trust avoids the inconvenience and expense of ancillary estate administrations. To establish a living trust for non-tax reasons, the client transfers property to the trust and acts as his own trustee, naming the other spouse, a family member, or a financial institution as a successor trustee. The trustee pays all trust income to the client and client's spouse and pays principal as requested by the spouses or based on a standard set in the trust document, such as health care, maintenance, and support. Upon the client's death, the trust continues during the surviving spouse's lifetime and terminates at some later date, such as upon the death of survivor.
Grandparents often consider making lifetime or testamentary gifts to their grandchildren.
Testamentary gifts to older grandchildren is a simple matter of making a bequest in a will with proper consideration to allocation of the death taxes. Typically, testamentary gift giving to younger grandchildren involves the traditional drafting of a testamentary trust as part of the client's will. The lawyer simply writes the trust, considering such factors as the frequency and circumstances under which income and principal are paid, the duration of the trust, alternate distribution of the trust should the grandchild pre-decease the grandparent, and naming the trustee and a successor trustee. A testamentary gift to a grandchild is a direct skip and subject to this tax. The election to use the exemption must be made on the client's federal estate tax return.