Q: I am the granter of a irrevocable trust set up as the beneficiary for a life insurance policy on myself. I want to
make a partial surrender of the policy to get money to pay my personal taxes. The trustees have agreed to this partial surrender . The insurance company has determined that the surrender is not a taxable event. What problems can I face legal or tax wise if i take the funds to pay my personal taxes.
A: There are many potential issues, not the least of which is your use of the assets in this trust as your personal piggy bank could cause the whole purpose of the trust to be derailed. There is a right way to do this and a wrong way. You should consult with the attorney who help you set this up. If he/she is not around, consult with an experienced estate planning or elder law attorney.
A: The trust agreement should be reviewed before giving you specific advice but I see several problems with this scenario. If the trust is liquidating any of the assets to be used for your personal benefit I expect the IRS will consider it property of your estate when the time comes. A proper review of your trust agreement and your personal needs should be completed by an estate planning attorney, who can properly advise you.
Richard William Cutler agrees with this answer
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