Legal Question in Wills and Trusts in California

Background:

I am the trustee. When the Settlor passed away several years ago, the trust became irrevocable. Beneficiary is Settlor's son. Per terms of the trust, Trustee has a great deal of discretion in making distributions. Beneficiary, who is now 12 years old, will receive the corpus when he reaches the age of 28. The trust corpus is currently around $250k.

My question: would it be advantageous to distribute to Beneficiary an amount equal to the annual exclusion, in order to avoid estate taxes when the ultimate distribution is made? (Who knows what the threshold will be by then, and who knows what the value of the trust will be by then?)

If so, is there a way it can be structured such that I, as trustee, may still exercise control over the distributed amounts? I.e., such that I can still control how the yearly distributions are invested, and keep them beyond the reach of Beneficiary or his legal guardian? E.g., accounts blocked to them?

I'm assuming the answer is no, but would like a second opinion.

Thanks!


Asked on 4/25/10, 8:04 pm

1 Answer from Attorneys
Ken Koenen, LLM Law Office of Ken Koenen

There would be no estate tax for a $250k estate. That is well below the level where estate taxes kick in. There is no need for a distribution of the priniciple.

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Answered on 4/30/10, 9:14 pm


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