SERIES 6 EXAM INCLUDES QUESTIONS ABOUT LIVING TRUSTS AND NECESSARY DOCUMENTS TO OPEN TRUST ACCOUNTS

One of the common misunderstandings of "living trusts" is that a person who sets up the trust, i.e., the "grantor," obtains sizeable and valuable tax benefits. This is not correct. The purpose of setting up a living or "revocable trust" is to provide an easier way to transfer assets to beneficiaries upon the death of the grantor, not to obtain tax benefits either for the grantor or for the beneficiaries.

The subject of Trusts is contained in the Series 6 Content Outline published by FINRA, indicating that questions on living trusts are contained on the Series 6 exam. (See FINRA Series 6 Content Outline Section 2.2.)

Bob Eder discusses Trusts and Estates in his Study for the Series 6 Exam. Here is a sample of Bob Eder's treatment of Living Trusts:

Trust Accounts                                                                                                                (2.2)

One of the most common trusts that is fairly easy to set up is the living trust. An owner of assets or mutual funds sets up a trust, then puts shares of mutual funds into the trust to fund it. The assets remain the property of the person who sets it up (i.e., the "grantor"), regardless of who is named as the beneficiary. Only upon the death of the grantor do the assets in the trust pass to the beneficiaries. Note that during the life of the grantor, income taxes still are assessed against him or her. A living trust is not a device to escape paying taxes on the income or dividends accruing in the trust. Why, then, if there are no tax benefits, set up a living trust? It allows assets owned by the grantor to be easily passed to the beneficiaries without first being tied up in probate proceedings in court.

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For questions about Bob Eder's Study for the Series 6 Exam, or questions in general about the Series 6 Exam, or about Trusts and Estates, simply email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001.

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