Madison Heights, VA asked in Estate Planning for Virginia

Q: I have a revocable trust naming my daughter as successor trustee. She is sole beneficiary. I recently discovered that

The sole trustee cannot be the sole beneficiary. Can my designated trustee also be the sole beneficiary?

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2 Lawyer Answers
Nina Whitehurst
Nina Whitehurst
PREMIUM
Answered
  • Estate Planning Lawyer
  • Crossville, TN

A: It is not true that the sole beneficiary cannot be the sole trustee. However, it is true that if you set it up that way, it is virtually impossible to afford the beneficiary any asset protection. If asset protection for her is your goal, then you should name an independent trustee and also take care to draft the distribution standard carefully and correctly to match your asset protection goal.

James H. Wilson Jr. agrees with this answer

James H. Wilson Jr.
James H. Wilson Jr.
PREMIUM
Answered
  • Estate Planning Lawyer
  • Glen Allen, VA
  • Licensed in Virginia

A: This is question requires a complex answer that should be discussed thoroughly with an experienced Virginia estate planning attorney, with particular reference to Virginia Code Section 64.2-776, part of the Uniform Trust Code, dealing with the discretionary powers of a trustee. The short answer is a successor trustee can be a sole beneficiary of the trust, but it may have significant practical consequences and tax consequences, including its effect on a credit shelter trust. In some cases, the trustee-beneficiary may be considered to have a general power of appointment over the assets of the trust, unless distributions to the beneficiary are limited by an ascertainable standard.

While one person can be trustee and beneficiary, one person cannot be the only three parties to a trust, the settlor, the sole trustee and sole beneficiary. In the latter case, the trust dissolves by merger.

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