Does this clause in a irrevocable trust I am trustee to allow me the legal right to make distributions of commercial rental income the trust produces to beneficiaries to avoid the trust paying high estate taxes on that income?

Forum|Forum|2 years ago
March 2, 2024
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("POWER OF TRUSTEE: To make allocations, divisions and distributions of trust property in cash or kind, to allocate different kinds of disproportionate shares of property or undivided interests in property among the beneficiaries or separate trusts , without liability for or obligation to make compensating adjustments by reason of disproportionate allocations of unrealized gain for federal income tax purposes and determine the value of any property so allocated, divided or distributed")

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M-MTax

That may cover it but it's talking about trust principal not income. Ask the atty who drafter the trust or someone who can look at the whole doc.

fordescort12Author

Thanks for your thoughts.

Can I ask why you belief the clause is referring to just trust principal?

I am not sure thus my posting this question and seeking thoughts from others like yourself, but my reading of the clause is that considering the clause states ("the trustee can make distributions of trust property") which is rather broad and makes no distinction between principal or income, it likely means the trustee can distribute income also the trust produces, including rental income?

M-MTax

Because there's a separate clause in many trusts that addresses only income, like

After payment of all expenses of administering the Trust and maintaining the Trust Assets, any part or all of the net income of the Trust may, in the absolute discretion of the Trustees, be retained or paid to or applied for the benefit of the Beneficiary to be used in furtherance of the Purpose, at such intervals and in such amounts as the Trustees from time to time deem requisite or desirable and/or to comply with any applicable legal requirements. Any net income not paid or applied shall be added to and become a part of the principal of the Trust.