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

Which of the following is a key advantage of a living (inter vivos) trust over a will for estate planning?

A living trust lets assets pass to beneficiaries under the trust deed without waiting for probate, and the trustee can manage the assets if the settlor becomes incapacitated. It still requires assets to be transferred to the trust and does not automatically remove tax liability.

  1. AIt avoids the need for any asset to be transferred to the trust
  2. BIt can help assets pass to beneficiaries without waiting for the probate process, and can operate during the settlor's incapacityCorrect
  3. CIt can never be revoked by the settlor under any circumstances
  4. DIt automatically removes all tax liability on the income of the trust

Explanation

A living trust is set up during the settlor's life and assets are transferred to the trustee, so after death they are distributed under the trust deed without probate, and the trustee can manage assets if the settlor becomes incapacitated. Assets must be transferred, revocability depends on the deed, and income is not automatically tax free.

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