Joel Posted January 18, 2008 Report Share Posted January 18, 2008 I have a client who is having an irrevocable trust established and the attorney is suggesting it be set up with a trap door. That is, if the grantor asks for proceeds from the trust and the trustee refuses, then the grantor can replace the trustee. The purpose of the trust is to avoid estate taxes. I see the following problems; Since the trust is irrevocable then the income is taxed to the bene (the grantor's Daughter, the trustee) and with the grantor receiving the proceeds how long would the relationship last? Funding of the trust would result in filing of a gift tax return and reduce the estate tax unified credit Finally, since I am not an attorney, I am only looking tax consequences. Any thoughts or suggestions I might further give to the client? Joel Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted January 18, 2008 Report Share Posted January 18, 2008 Where did my post go? Who is the income beneficiary? Is the trust required to distribute the current income each year? This can different from the corpus beneficiary. The trust itself can be taxed on the income. Not enough information to say much more. This techinque is sometimes used to freeze estate values. Quote Link to comment Share on other sites More sharing options...
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