4.1.3.1.2.1 Types of Trust Accounts
There are many different ways to categorize trust accounts. For the exam, learn the following distinctions: revocable versus irrevocable, living versus testamentary, simple versus complex, and charitable versus non-charitable.
Revocable versus irrevocable trusts. The most common form a trust account used is a revocable living trust, which is a trust that can be revoked (eliminated) at any time prior to death by the person who owns the assets (the trustor). In the event that the trust is revoked, ownership of the assets reverts back to the person to whom they originally belonged.
For the exam, the most likely question you’ll encounter will have something to do with who can initiate transactions, control the transfer of funds and disbursements, etc., from a trust. The answer is the trustee (not the trustor or beneficiaries), regardless of who originally set up the trust. Although, often, the trustor will appoint herself as the initial guardian (trustee) of those assets, essentially making this account equivalent to an individual account (or a joint account if the trust is set up by more than one party).
Another type of trust is an irrevocable trust. As the name implies, once these trusts are set up, they cannot be undone or revoked. In fact, they typically will be given their own tax identification numbers and be treated as a separate taxpayer for tax purposes. Again, in this case, the trustee is the person fro