2022 Trust Forum Presentations

WHEN MAKING DISCRETIONARY DISTRIBUTIONS WHAT SHOULD THE TRUSTEE CONSIDER? 1. Use up IR = 1 trusts for children before making distributions to children from IR = 0 trusts. 2. If the only trust for child is an IR = 0 trust, consider: a. If child wants to buy a home, rather than distribute cash out to child to purchase the home in child’s name, buy the home in trust name. This keeps the IR = 0 trust “full” so more can pass to child’s children without estate tax (or GST tax) when child dies. b. If child wants a distribution to fund a business, have the trust invest in and own the business instead. The child is compensated for work in the business but value of the business itself stays in the IR = 0 trust to pass without estate tax (or GST tax) when child dies. c. Can consider loaning money to child from IR = 0 trust rather than making distribution. Leaves IR = 0 trust “full” so more can pass without estate tax (or GST tax) when assets ultimately pass to grandchildren. 3. Try to make distributions to grandchildren or more remote issues from trusts with IR = 0.

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WHAT INVESTMENT CONSIDERATONS SHOULD A TRUSTEE TAKE INTO ACCOUNT RELATED TO THE GST? 1. If there are IR = 1 and IR = 0 trusts for the same beneficiary, when diversifying the investments for that beneficiary in his/her trusts, the IR = 0 trust should have the “growth” assets and the IR = 1 the more liquid/conservative investments. 2. This approach: a. Focuses growth on the IR = 0 trust while limiting growth in the IR = 1 trust, so more passes to grandchildren without transfer tax when child dies. b. Leaves liquid assets in IR = 1 trust so available for distributions to child.

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