Is a living trust based on state or federal law?
A living trust is based on state law. In Indiana, the Indiana Trust Code dictates most of the laws governing living trusts. This includes who can be the "trustee" or person responsible for managing and administering the trust, how to create and fund a trust, and when and how the trustee must distribute trust assets. Furthermore, the Indiana Trust Code also outlines the rules surrounding trust income, taxation, and investment. Federal law may also come into play in dealing with living trusts, particularly if you are dealing with certain types of assets such as a 401(k), IRA, or other federally regulated investments. Federal law governs these assets and any rules they have regarding trusts must be followed. Living trusts are an important way to protect property from taxes and probate court. It is important to consult an experienced attorney to ensure the trust is properly funded, drafted, and administered in accordance with both state and federal law.
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