Can earnings of a revocable trust be distributed to the beneficiary of that trust prior to death of its trustor? If so, what is the name of this type of trust? [email protected]
Yes, in theory; it depends on the language of the trust.
You have a set of very complex questions; you really need to hire an expert.
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It depends on the provisions and the goals of the trust. You will need to meet with an attorney and have the trust reviewed thoroughly to determine the answer to this question and any tax or other implications in doing so.
All answers provided on Avvo by Attorney Alexis B. Kaplan are not intended as legal advice, nor do they create any attorney-client privilege between Attorney Kaplan and the questioner or anyone else using the website. Attorney Kaplan is licensed in Massachusetts, and does not practice law in any other jurisdictions.
Strictly speaking, a distribution can only be made under the terms of the trust document. If the family generally or individual are listed as being able to receive anything the trustee wants to distribute, then there is no restriction. If the trustee is only allowed to distribute to the grantor during the grantor's life, then the distribution would break the rules.
That being said,in almost every revocable trust the grantor is also a trustee and a current beneficiary. If he or she is sole trustee in that circumstance, as a practical matter the trustee can distribute to anyone without penalty. It would be viewed as them requesting (as beneficiary) that they distribute money (as trustee) to the third party on their behalf, or at minimum as exercising their right to partially revoke the trust. In my practice, we always advise that the distribution be made to the grantor and that they then forward the funds, so that there is not even the appearance of any issue.
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