Can a Revocable Trust Give a Gift?
As a grantor of a revocable trust, you may wish to give a part of your estate as a gift to a person or an institution — after all, it is revocable and the arrangement can be changed at any time. But most people shudder away from doing so, even when they want to because they dread filling out Form 709. Federal gift tax implications are also another thing to worry about.
Here's a great guide about revocable trusts how to give, and navigate through form 709.
How Beneficial is a Revocable Trust?
Revocable trusts — also known as revocable living trusts — are estate planning tools that tell the legal system what will go to whom after your death. Much like a will that serves a similar purpose, a revocable trust is different in the sense that it is created and becomes active while you are still alive. The provisions of a will only take effect after death.
The term “revocable” means the trust can be changed throughout your lifetime and becomes permanent once you (the grantor) dies. This is unlike irrevocable trusts that remain relatively unchanged once notarized. If you are still unsure about which one you prefer, you can read about the major differences between revocable and irrevocable trusts.
The benefits you get from opting for a revocable trust are:
The option to make amendments whenever you feel like is one of the biggest benefits of a revocable trust over other types of trusts. Revocable trusts make a great choice for many people, especially young professionals who would prefer to keep their options open about who or what they intend to give out in the future.
Another big benefit of a revocable trust is the promise of privacy. Beneficiaries under a will have their inheritance allotment made public once the assets are distributed. This is not so with a revocable trust. It is a civil offense for a member of the public to dig up your records or disclose what was passed down to your loved ones.
There are people who believe revocable trusts are exclusively for the rich because of what they imagine the costs to be. While this may be true when consulting highly decorated attorneys, you only get to spend an incredibly low amount on notarization and other legal necessities if you use services like DoNotPay.
Either way, the cost associated with getting a revocable trust is nothing compared to what your loved ones will have to incur if they go through probate.
Avoidance of probate
With a revocable trust, you help your beneficiaries skip probate — the lengthy, expensive court process that decides how your properties are distributed according to your will. This is a good reason to opt for a revocable trust.
Deposit insurance protection
The Federal Deposit Insurance Corporation protects all assets registered under a revocable trust. You and four other beneficiaries can get up to $1.25 million in coverage for all assets registered under your trust.
Giving Gifts Through Your Revocable Trust
According to the federal tax laws revised in 2013, you can give any part of your estate under a revocable trust as a gift to a person other than your spouse, provided the gift is less than $15,000 within a calendar year. Any gift worth more would require you to file a living trust gift tax report with Form 709.
Form 709 is a document required by the Internal Revenue Service from persons that give over $15,000 to a single individual during a single year.
You can give gifts to several persons or institutions without the need to fill Form 709, provided the gifts in total under $15,000.
Typically such gifts may take the form of:
- Gift splitting: for married couples operating joint revocable trusts
- Gift tax exemption for children
- Direct skip: The process of gifting an asset to a person who is not:
- an immediate descendant
- a blood relative
- 37.5 years or younger than the donor
How to File Form 709
Form 709 is available on the IRS website. To file a form 709, you have to:
- Submit your tax filings on or before the 15th of the next April month from the date the gift was made.
- Charge the gifts to be deducted from your lifetime exemption which is about $11.58 million (adjusted annually).
- Submit your trust details and the terms and conditions regarding the trust.
- Determine how the asset was valued (in the case where the asset is non-monetary).
- Provide any other additional information that is required by IRS laws.
Your completed form can be submitted physically or through United States Parcel Services (USPS) at the IRS office address below:
Department of the Treasury Internal Revenue Service Center Kansas City, MO 64999
Cases when Form 709 is not necessary
You do not need to file a Form 709 if you:
- Gifted $15,000 or less throughout the year
- Donated to a political organization
- Donated to certain organizations covered in the exempt class
- Gifted the money for an educational purpose
- Gifted the asset for a medical purpose
- Gifted your spouse
How to Get a Revocable Living Trust from DoNotPay
Setting up a revocable trust is pretty easy and affordable when you use DoNotPay. You can choose a template form to fill in or allow DoNotPay to guide you through the process from start to finish, following the steps below:
- Log-in to after subscribing
- Create a new Revocable Living Trust task
- Provide the following information:
- Your name and state of residence
- Your trustees and beneficiaries
- Properties and assets under the trust
- The specifics of what will go to whom
That’s it! Your answers will be used to create your very own revocable living trust. You can download a copy of the trust straight from your device and get it notarized!
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