Purposes of Trusts

• Trusts have a number of purposes in financial and charitable planning. Depending on the circumstances, they may allow the grantor to avoid having to pay taxes on the money devoted to a charitable purpose, or shelter assets from any estate taxes that may apply. They also help shield assets from the claims of creditors.
  
  

Qualified Revocable Trusts

• A qualified revocable trust is a trust that has been deemed to be part of the decedent's estate for the purposes of calculating income tax liability. The federal law governing this election is Internal Revenue Code Section 645(b)(1).
  
  

Advantages

• When someone dies, there are often substantial costs to probate and to administering the estate. By combining assets in a revocable trust with the overall estate of the deceased, the estate can avoid being subject to multiple layers of administrative costs.
  
  

Making the Election

• To make the election to include a revocable trust as part of the estate, thus treating it as a qualified revocable trust, the estate administrator must fill out IRS Fom 8855 - Election to Treat a Qualified Revocable Trust as Part of an Estate. The form must be signed both by the trustee of the revocable trust and the representative of the estate.