FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client, a 55-year-old successful business owner, approaches a registered representative seeking a way to manage their assets for the benefit of their children after their death, while avoiding probate and maintaining control over the assets during their lifetime. Which of the following estate planning tools would be most suitable?
- AA Transfer on Death (TOD) designation on their brokerage account
- BA simple will
- CA revocable living trust
- DAn irrevocable trust
Show answer & explanationAnswer & explanation
Correct answer: C. A revocable living trust
A revocable living trust allows the grantor to maintain control over the assets during their lifetime, avoid probate upon death, and can be changed or revoked. An irrevocable trust would mean losing control, a will goes through probate, and TOD avoids probate but doesn't offer the same level of control and management flexibility as a trust.
Why the other options are wrong
- A. A TOD designation avoids probate for specific accounts but does not offer the comprehensive asset management and control during life that a trust provides.
- B. A simple will directs asset distribution but requires probate, which the client wants to avoid.
- D. An irrevocable trust removes the grantor's control over the assets, which contradicts the client's desire to maintain control.
Revocable Living Trust
An estate planning tool that allows the grantor to place assets into a trust, maintain control over them during their lifetime, avoid probate, and modify or revoke the trust as needed.
- Grantor retains control of assets during their life.
- Avoids probate upon the grantor's death.
- Can be modified or revoked by the grantor.
- Assets distributed to beneficiaries according to trust terms.
Memory trick: Revocable trusts offer 'control' and 'no probate' like a flexible living will.