Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is a key characteristic of an irrevocable living trust?

1. The grantor can modify it at any time

2. The grantor maintains full control over the assets

3. The trust property will not be included in the grantor's estate

4. The grantor must outlive the transfer by three years

The correct answer is: The grantor must outlive the transfer by three years

The key characteristic of an irrevocable living trust is that the trust property will not be included in the grantor's estate. Once assets are transferred into an irrevocable trust, the grantor relinquishes control over those assets and cannot modify the terms of the trust, which helps to effectively remove those assets from the grantor's estate for tax purposes. This feature is especially significant for estate planning, as it can lead to potential tax benefits and protect the assets from creditors or legal judgments. In contrast, the ability to modify a trust, maintain control over assets, or stipulations about how long the grantor must live after transferring the assets do not apply to irrevocable trusts. Therefore, the correct answer emphasizes the irrevocable nature of the trust's assets in relation to the grantor's estate.