Also known as: revocable declarations of trust · revocable trust
Written by attorneys — see sources below.
An instrument by which a settlor declares a trust over identified property while retaining the power to revoke or amend the trust during the settlor's lifetime. The capacity required to create, amend, revoke, or add property to the trust is the same as that required to make a will.
Roger Ramirez, while hospitalized, signs a document declaring himself trustee of his brokerage accounts for the benefit of his children and expressly reserves the right to revoke or amend at any time. Because Roger possesses the mental capacity required to execute a will, the declaration creates a valid revocable trust even though no separate transfer of title occurs.
Rosalind Reed's estate includes assets held in a revocable trust she created by declaration. In a federal estate-tax controversy, the court determines the trust's validity and the characterization of interests under state law as authoritatively decided by the state courts rather than re-litigating those property questions.
In 1930 a New York resident created a revocable trust that was amended in 1931. The trust directed income from the corpus to his wife for life. It also granted her a general power of appointment. In default of appointment half the corpus passed to the decedent's heirs and half to the wife's heirs. In 1951 the wife executed an instrument that purported to release the general power and convert it into a special power. The decedent died in 1957. His estate claimed a marital deduction for the widow's trust on the federal estate tax return. The Commissioner disallowed the deduction under section 2056(b)(5) of the 1954 Code and assessed a deficiency. The estate petitioned the Tax Court for redetermination. While that proceeding was pending the estate obtained a New York Supreme Court decree declaring the 1951 release a nullity. The Tax Court accepted the decree as controlling and allowed the deduction. A divided Second Circuit affirmed. The companion case involved the estate of a Connecticut decedent who died in 1958. His will directed payment of estate taxes without proration and created a residuary trust granting his wife a general testamentary power of appointment. The Commissioner disallowed part of the marital deduction. The executor then obtained a probate court order applying the state proration statute. The District Court refused to treat the probate decree as binding on federal tax questions. The Second Circuit agreed the decree was not conclusive. The two cases reached the Supreme Court after the Second Circuit panels reached differing conclusions on the effect of the state decrees. Certiorari was granted to resolve the conflict among the circuits.
View caseYes. Under the majority statutory approach, divorce revokes any revocable disposition or fiduciary nomination in favor of the former spouse by treating the former spouse as having predeceased the settlor, unless the instrument, a court order, or a marital agreement expressly preserves the interest.
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No. Marital property transferred to a revocable trust remains marital property because the transfer itself does not alter the underlying ownership character between the spouses.
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The capacity required is the same as that needed to make a will.
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…reads: “A legacy may be made in form or in substance to the trustee in accordance with the terms of a written inter vivas trust, including an unfunded life insurance trust although the settlor has reserved all rights of ownership in the insurance contracts, if the trust instrument has been executed and is in…