[WSBAPT] Question about revocable/irrevocable trust

Fri Feb 18 12:27:16 PST 2022

Dear Candace,

Heather is correct, the client would need to forego their ability to amend/revoke the trust in any way, along with surrendering the rights as a beneficiary, and service as a Trustee.  This would be a taxable gift to son, as the next beneficiary.  Since there are a host of provisions that may be overlooked that will cause the living trust to nevertheless be brought back into her taxable estate - such as the requirement in most LTs that its assets be used to pay estate expenses and taxes - it would be best to start with an Irrevocable Trust.

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Candace Wilkerson
Sent: Friday, February 18, 2022 11:06 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Question about revocable/irrevocable trust

Hi Listmates,

I'm not a tax attorney, and have never been faced with this question before.  I normally don't draft irrevocable trusts.

One of my clients has a revocable living trust I drafted for her.  She is the present beneficiary and trustee, and her son is the remainder beneficiary.  She has asked me to amend the trust to remove her as trustee, in order to remove the trust assets from her taxable estate.

It's my understanding that, even if this could be switched from a revocable to an irrevocable trust, she would need to be removed both as trustee and beneficiary for the purpose of removing the trust assets from her taxable estate.  I suppose the trust could be amended and restated (and the title changed) to accomplish this purpose, but would the fact that it began as a revocable trust raise a red flag for estate tax purposes?

She already has real property that was transferred to the trust and doesn't want to have to transfer it to a new trust; but I'm concerned that doing what she wants isn't going to accomplish her primary purpose.

Thanks for your advice!

Best,

Candace Wilkerson

*Candace is available to respond to emails and phone calls between the hours of 7:00 a.m. and 3:00 p.m.  If you have an urgent matter outside that time period, please call our office at the number below.

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