[WSBAPT] Modifying Beneficiaries of an Irrevocable Trust

[David Faber]

Doug,

Thank you for getting back to me. The gift route would be the simplest, but
I am trying to avoid gift tax implications if at all possible. The Trust
has no power of appointment and provides the following:

(1) upon death of the surviving grantor, the four children each share
equally in the remaining trust estate; (2) if one of the four children
predecease the surviving grantor, the predeceased child's share is
distributed to their issue; (3) if no issue, then the predeceased child's
share is distributed to the other three children or their surviving issue.

Provided one of W or C is still living, then they would take under either
(1) or (2) above, so I'm trying to figure out whether them being the only
contingent beneficiaries of W's trust share, at least up to that point,
would allow them to vary the terms of the trust to pass to H without
triggering the gift tax implications. Additionally, W, in particular, wants
to ensure that H receives the future interest in the trust now rather than
relying upon C to make the gift at some future date. C is currently willing
and happy to make the transfer, but upon W's death, C might have a change
of heart. We're trying to account for all of these eventualities before
they occur. An agreement to give a gift in the future wouldn't stand up,
but I guess I'm wondering if some written evidence of a gift of a future
interest in an irrevocable trust would so stand up.

Best,
David J. Faber
Faber Feinson PLLC
210 Polk Street, Suite 1
Port Townsend, WA 98368
(360) 379-4110

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On Tue, Aug 29, 2017 at 10:22 AM, Doug Owens <dougowens at seattlerelawyer.com>
wrote:

> Dear David, this is an interesting question.  It is hard to answer your
> specific question without looking at the trust language.  It may not be
> binding on anyone but W and C could agree that upon the death first of W
> and then of stepmother, C could simply gift the share coming to C to H.
> There could be gift tax implications for C but unless the share is very
> large there would not likely be any actual gift tax to pay at the time.
> Yours truly, Doug Owens
>
> On Aug 29, 2017, at 9:55 AM, David Faber <david at faberfeinson.com> wrote:
>
> Some clients of mine brought up a novel situation for me yesterday:
>
> (W)ife is a remainder beneficiary of a family trust along with three
> siblings. The trust became irrevocable upon her father's death. The trust
> specifies that if W predeceases her stepmother, W's share passes to W's
> issue upon stepmother's death. W has a (C)hild from a previous
> relationship. W and C both agree that (H)usband should receive W's interest
> in the trust if W predeceases stepmother. The trust grants no power of
> appointment to W and the trust cannot be modified by stepmother (plus, the
> relationship with stepmother is strained).
>
> Would having W & C, as all of the remainder beneficiaries of a particular
> tranche of the trust estate, execute a written agreement directing the
> tranche to H upon W's passing work to supplant the current pathing of
> remainder beneficiaries?
>
> Best,
> David J. Faber
> Faber Feinson PLLC
> 210 Polk Street, Suite 1
> Port Townsend, WA 98368
> (360) 379-4110
>
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