Monday, March 21, 2011 NEET Tips
NEET Tips answers questions posed online to the NEET website
Does a trust have to be set up in advance to be the beneficiary of another trust?
While it might be possible for a standalone recipient trust to be set up to accommodate a pending distribution from a pre-existing trust, in practical terms the recipient trust must be properly named in the distribution trust in order for the distribution to proceed. If the recipient trust is not properly named, and trust names should include the date of creation, then there is likely to be ambiguity as to what the grantor intended.
Most often, subtrusts spring from a pre-existing trust, for example a married individual’s revocable living trust converts into an irrevocable credit shelter trust, and possibly an irrevocable marital trust. Or, an unmarried individual’s trust converts into irrevocable beneficiary controlled trusts for their children. In these situations, the subtrusts are not set up at the time of the original trust’s execution, but rather come into being upon the death of the grantor. |