Taxable estate, A-B trust, replace corporate trustee. Is there a wayI can complete the b trust myself?
Full Question:
Answer:
In regard to an A-B trust in a situation where your husband has died and the corporate trustee of the A-B trust no longer exists, you ask if you (your husband's widow) can "complete" the trust yourself. I interpret your question to mean "Can you yourself admininister the trust as trustee?
First, an A-B trust is an informal term used to designate a trust designed to capture the amount of the exemption from the federal estate tax in the estate of the first spouse to die, and to leave the remainder, if any, of the deceased spouse's estate in a marital trust for the benefit of the surviving children, with any amount remaining in the marital trust upon the surviving spouse's death, passing to the children of the first spouse to die. An A-B trust is also known as a credit-shelter trust.
As a general rule, and for several reasons, only a corporate trustee may serve as trustee of a credit-shelter trust.
First, the trust may specify that the trustee must be a corporate trustee. Second, a person who is a beneficiary of an irrevocable trust, that would be you as a dececedent's surving spouse and the beneficary of a marital trust, cannot under federal estate tax law be the trustee of a marital trust (a marital trust is one component of a credit-shelter trust). A marital trust must have as trustee a person other than the income beneficiary.
Second, courts always have authority to appoint a successor trustee. You or your husband's children (who may also be your children) could petition the court to appoint a successor trustee. This is a very simple legal matter. But notice must be given and the court must approve a nominated trustee. You could consider seeking the advice and assistance of an experienced trust and estate or probate attorney in this matter.
Finally, this is a matter that should be done immediately. Delay in the appointment of a successor trustee could create additional problems.
Some general principles of law in this area are set forth below.
Trustee Law & Legal Definition. The person who manages a trust, the trustee, has a legal duty to manage the trust's assets in the best interests of the beneficiary or beneficiaries. Typical trustee duties include managing rental properties, investing funds or paying income to the beneficiary.
How much a trustee is required to do and how much access he or she has to the funds should be specified in the trust. A simple or mandatory trust requires the trustee to distribute income to the beneficiary. A complex or discretionary trust may afford the trustee discretion over the principal and income to be distributed.
Generally, trustees are paid for their services because of the amount of work involved in managing a trust and the threat of potential liability if assets are mismanaged. It is advisable to agree in advance upon how much a trustee is to be paid. Due to the high standard of duty and liability imposed on trustees, an individual or entity cannot be forced into becoming a trustee just because he or she is named in a trust document or will. If your designated trustee is unable or unwilling to perform, the court will appoint a trustee for you, unless a successor trustee is named in the trust instrument.
If a co-trustees are named, they usually have the same powers and obligations. In some cases, a co-trustee may be a temporary replacement for the original trustee if he/she is unable to act. The co-trustee must consult with the other trustee(s), unless the language of the trust allows one co-trustee to act alone.
Trusts Law & Legal Definition. A trust is the legal relationship between one person, the trustee, having an equitable ownership or management of certain property and another person, the beneficiary, owning the legal title to that property. The beneficiary is entitled to the performance of certain duties and the exercise of certain powers by the trustee, which performance may be enforced by a court of equity.
Most trusts are founded by the persons (called trustors, settlors and/or donors) who execute a written declaration of trust which establishes the trust and spells out the terms and conditions upon which it will be conducted. The declaration also names the original trustee or trustees, successor trustees or means to choose future trustees. The assets of the trust are usually given to the trust by the creators, although assets may be added by others. During the life of the trust, profits and, sometimes, a portion of the principal, called the "corpus", may be distributed to the beneficiaries, and the remainder to is usually distributed upon the occurence of an event, such as the death of the creator. A trust may created as an alternative to a will in order to avoid probate and higher taxation. There are many types of trusts, including "revocable trusts", created to handle the trustors' assets (with the trustor acting as initial trustee), also called a "living trust" or "inter vivos trust", which only becomes irrevocable on the death of the first trustor; "irrevocable trust," which cannot be changed at any time; "charitable remainder unitrust," which provides for eventual guaranteed distribution of the corpus (assets) to charity, providing a substantial tax benefit. There are also "constructive" and "resulting" trusts declared by a court for equitable reasons over property held by someone for its owner. A "testamentary trust" can be created by a will to manage assets given to beneficiaries.
