ESTATE PLANNING: Using and existing trust

2013-07-06T15:20:00Z ESTATE PLANNING: Using and existing trustChristopher W. Yugo Times Business Columnist nwitimes.com
July 06, 2013 3:20 pm  • 

Q: If a person who has a revocable trust of his own and also is the ongoing beneficiary of another irrevocable trust dies, can the irrevocable trust distribute the money to his revocable trust rather than directly to his children?

A: Possibly, but it will be entirely dependent on the terms of the irrevocable trust.

It’s not unusual for a trust established for the benefit of a loved one to be funded by different sources or even different individuals. For example, say you established a trust for your son Bobby. The trust could be established within your revocable living trust, your will or even as a free standing document. You could then name Bobby’s trust beneficiary of your revocable living trust, or heir under your will or even the beneficiary of a life insurance policy or IRA.

In addition, Bobby’s uncle could direct funds to Bobby’s trust in similar a fashion. As long as the terms meet with the uncle’s approval, he can take advantage of the existing trust rather than create his own trust for Bobby’s benefit.

Trusts are great estate planning devices and are flexible enough to fit a lot of different situations. As long as you understand the terms and are OK with them, why not use an existing trust rather than establishing a second one?

In your particular situation, things are little different because the trust is already established. At this point, the terms of trusts likely can’t be changed. Also understand that naming an individual as a beneficiary is not the same as naming a trust for their benefit. If the irrevocable trust names the kids beneficiary, it would be difficult to argue that the beneficiary should actually be a trust established for their benefit by someone else. The trust and the kids are not the same.

What I’m trying to say is if the irrevocable trust says pay the money to the kids, you have to pay it to the kids. The fact someone else established a trust for them doesn’t change the beneficiary in the irrevocable trust.

Finally, if you decide to name someone else’s trust beneficiary of your estate, make sure you understand who will ultimately get the money. Although you might like the terms during the administration, you might not like who gets the money when the trust terminates.

Christopher W. Yugo is an Attorney in Crown Point Indiana. Chris’ Estate Planning Article will appear every Sunday in the Times. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, Indiana 46321 or to Chrisyugolaw@gmail.com. Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.

Copyright 2014 nwitimes.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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