Tax, Audit, Firm and Regulatory News

Today’s Estate Planning Topic (March 13, 2018)

]

Keeping a trust a secret could violate state law

If your estate plan includes one or more trusts, you may have a good reason for wanting to keep them a secret. For example, you may be concerned that, if your children or other beneficiaries knew about the trust, they might spend recklessly or neglect educational or career pursuits. Despite your good intentions, however, the law in many states requires trustees to disclose certain information to beneficiaries.

Disclosure requirements

One example can be found in the Uniform Trust Code (UTC), which more than 20 states have adopted. The UTC requires a trustee to provide trust details to any qualified beneficiary who makes a request. The UTC also requires the trustee to notify all qualified beneficiaries of their rights to information about the trust.

Qualified beneficiaries include primary beneficiaries, such as your children or others designated to receive distributions from the trust, as well as contingent beneficiaries, such as your grandchildren or others who would receive trust funds in the event a primary beneficiary’s interest terminates.

Use a power of appointment

One way to avoid the disclosure requirements is by not naming your children as beneficiaries and, instead, granting your spouse or someone else a power of appointment over the trust. The power holder can direct trust funds to your children as needed, but because they’re not beneficiaries, the trustee isn’t required to inform them about the trust’s terms — or even its existence. The disadvantage of this approach is that the power holder is under no legal obligation to provide for your children.

Before taking action, it’s important to check the law in your state. Some states allow you to waive the trustee’s duty to disclose, while others allow you to name a third party to receive disclosures and look out for beneficiaries’ interests. In states where disclosure is unavoidable, you may want to explore alternative strategies. If you have questions regarding trusts in your estate plan, please contact us.

 

© 2018

About Topel Forman

What makes our firm special

Contact Us

Reach out to Topel Forman

Services

Learn what we have to offer

Related News Posts

New revenue, donor concentration, and expense allocation: Form 990 issues to watch

New revenue, donor concentration, and expense allocation: Form 990 issues to watch

Changes in revenue, expense allocations, and donor concentration can create Form 990 complications that aren’t always visible in the financial statements alone. This article walks nonprofit leaders through three key areas to review before year-end: supporting expense classifications across program, management, and fundraising functions; evaluating whether new income-producing activities trigger unrelated business income tax; and monitoring public-support calculations when donor concentration is rising. Addressing these issues early keeps year-end surprises to a minimum and helps protect your organization’s tax-exempt status.

read more
The pro-rata rule: the backdoor Roth IRA mistake that can create an unexpected tax bill

The pro-rata rule: the backdoor Roth IRA mistake that can create an unexpected tax bill

The backdoor Roth IRA strategy can trigger an unexpected tax bill if you overlook the pro-rata rule, which requires the IRS to treat all of your traditional IRA balances together when calculating how much of a conversion is taxable. A separate account, a prior 401(k) rollover, or even a year-end IRA balance you didn’t have at the time of conversion can all affect the result. Before contributing or converting, review your full IRA picture to avoid a costly surprise at tax time.

read more
Charitable Giving After the One Big Beautiful Bill

Charitable Giving After the One Big Beautiful Bill

Starting with 2026 returns, OBBB changes how charitable gifts are deducted. Our senior tax manager of tax policy, planning and research walks through the new 0.5% floor and the 2/37 limit on itemized deductions, and how bunching, donor-advised funds and gift timing can help clients keep more of their deduction.

read more