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 retaining full control and flexibility over the assets during their lifetime. They also want to avoid probate. Which estate planning tool would be MOST suitable for this client?
- ATestamentary Trust
- BRevocable Living Trust
- CUniform Gift to Minors Act (UGMA) Account
- DIrrevocable Living Trust
Show answer & explanationAnswer & explanation
Correct answer: B. Revocable Living Trust
A revocable living trust allows the grantor (the client) to retain full control over their assets during their lifetime, make changes as needed, and avoid probate upon their death. This directly matches the client's stated needs.
Why the other options are wrong
- A. A testamentary trust is created by a will and only becomes effective upon death, meaning it goes through probate and offers no control during the grantor's lifetime.
- C. An UGMA account is for minors, and while it avoids probate, the grantor does not retain full control; control transfers to the minor at the age of majority.
- D. An irrevocable living trust removes the grantor's control over the assets once established, which contradicts the client's desire to retain full control and flexibility.
Revocable Living Trust
An estate planning tool that allows the grantor to maintain control of assets during their lifetime, avoids probate, and can be changed or canceled at any time.
- Grantor retains full control over assets.
- Avoids probate process.
- Can be amended or revoked by the grantor.
Memory trick: Revocable: Retain Control, Roll Past Probate