Pleasant Hill, CA asked in Estate Planning and Tax Law for California

Q: Irrevocable trust has three sibling equal beneficiaries - one sibling is trustee. Are IRS rules for grantor trust met?

The original settler is deceased. The trustee has power to distribute his 1/3 of income and principal to himself. The question is whether the Trustee-beneficiary is considered a substantial owner under IRC 678(a)(1) and therefore taxed currently on his 1/3 of trust income.

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1 Lawyer Answer
Julie King
Julie King
  • Estate Planning Lawyer
  • Monterey, CA
  • Licensed in California

A: It is most likely a non-grantor trust, but there is no way to know unless a lawyer reads the terms of your particular trust. Each trust contains different language. The main question will be whether the settlor/grantor of the trust has any control or powers. Take your trust to an attorney in your area and have him/her advise you. This is one question you don't want to guess on because there are tax implications. Best wishes!

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