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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Tools for Estate Planning

Mr. Raghavan creates a revocable trust, transfers his flat to it and remains the trustee and a beneficiary during his lifetime. What is a key planning characteristic of this arrangement?

A revocable trust lets the settlor amend or revoke it, so he keeps control over the assets while alive. This also means it does not give strong creditor protection, and assets left outside the trust still need a Will for succession.

  1. AHe can amend or revoke the trust, so the assets generally remain within his controlCorrect
  2. BThe trust becomes irrevocable immediately on creation
  3. CThe assets are fully protected from his own creditors
  4. DThe trust deed substitutes for the need for any Will for assets outside the trust

Explanation

A revocable trust lets the settlor change terms or take back assets, so control is retained. Because of this retained power, it does not give creditor protection like an irrevocable trust. Assets not transferred to the trust still need a Will or other succession route, so the last option is wrong.

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