[WSBAPT] Modifying Beneficiaries of an Irrevocable Trust

[John Creahan]

Is W likely to outlive stepmom, given their ages and what you know about their health?

John Creahan
www.cairn-law.com<http://www.cairn-law.com/>
Now located in the heart of Fremont
3417 Evanston Ave. N, Suite 312
Seattle, WA 98103
206-578-5877


From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of David Faber
Sent: Wednesday, August 30, 2017 11:47 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Modifying Beneficiaries of an Irrevocable Trust

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<mailto: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<mailto: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<tel:(360)%20379-4110>

*** NOTICE: ATTORNEY CLIENT COMMUNICATION - PRIVILEGED & CONFIDENTIAL.  This communication may contain privileged or other confidential information. If you are not the intended recipient, or believe that you have received this communication in error, please do not print, copy, retransmit, disseminate, or otherwise use the information. Also, please indicate to the sender that you have received this communication in error, and destroy the copy you received.***
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