Is property in a revocable trust part of the taxable estate?

What practitioners describe for revocable trusts

Trust and estate practitioners describe revocable trusts as commonly used in connection with probate and privacy after death. Practitioners say beneficiaries may receive assets in trust instead of receiving the assets outright. For a family that holds an operating business or real estate, that description concerns how property reaches the next generation.

Funding and incapacity management

Estate planning practitioners describe a revocable living trust as connected with probate, greater privacy, and management during incapacity. Trust and estate practitioners describe also correct funding as a condition of those purposes. Funding refers to placing assets into the trust.

Grantor trust treatment of income and transfers

Practitioners describe an intentionally defective grantor trust (IDGT) as treating trust income as the grantor's income for income tax purposes. Estate planning practitioners describe the same trust as excluding trust assets from the grantor's estate for estate tax purposes.

Practitioners describe transfers to an IDGT as respected for gift and estate tax purposes and disregarded for income tax purposes. Three separate tax systems are therefore involved in this arrangement.

Basis at the grantor's death

Practitioners say assets removed from a grantor's estate through a spousal lifetime access trust (SLAT) would not receive a basis step up at the grantor's death. Basis is the tax cost figure used when an asset is later sold, so the absence of a step up bears on any later sale of a business interest or a parcel of real estate.