Are Assets in a Revocable Trust Subject to Estate Tax?

Yes, assets in a revocable trust are generally subject to estate tax. It is an estate-planning tool created by the grantor in which the grantor retains control over the assets during his lifetime. These trusts are revocable in that at any time during one's lifetime, he has the powers to amend or dissolve it and repossess the assets at will. In other words, because such retained control upon an estate takes place, the IRS and all other tax authorities view the passing of such assets as part of a grantor's taxable estate upon his death.

The assets in the revocable trust will be pulled back into the estate for tax purposes upon the death of the grantor, adding the full value to it. If this pushes the value over the threshold set by the tax authority above which estate tax must be paid, then the assets within the trust may be subjected to estate tax.

Nevertheless, even revocable trusts have their own advantages, such as avoiding probate, allowing for a smoother transition of the assets to the beneficiaries. This can be a good estate planning tool notwithstanding the fact that the said trusts do not exempt the assets from the estate tax.

One Pacific Trust specializes in guiding individuals through the complexities of estate planning, including revocable trusts. Their expertise ensures that clients are well-informed and make the best decisions to secure their legacy while considering tax implications and other critical factors.