The Listen to Lawrence Letter: Can Trustees Payout to themselves without Jeopardizing the Trust?
November 9, 2021
Dear Clients and Friends,
The answer to this next question is “Yes” but requires a careful explanation so as not to jeopardize the integrity of the trust. Read the answer carefully and all the way through to not only fully understand but to see how important it is to draft a trust with the right language.
With my consent, can the trustee(s) payout to themselves without jeopardizing the Trust?
I draft all of my trusts with a little added protection for my clients. I would never want to tempt a trustee to “borrow” from your trust, for any reason. If the trustee needs money (or any other beneficiary), for whatever reason, I build into the trust that the trustee must first seek your consent. This not only protects you but allows you to retain more dignity.
With your advanced consent, the trustee can withdraw both income and principal from the trust. However, regarding principal, except in emergency situations, I would prefer that no money leave the trust during the 5-year look-back period, especially early in the look-back. The reason for this warning is that if you need long-term care before the look-back is over, we may need to find a way to return all the money, which won’t be able to happen if some were previously withdrawn.
However, in either event, paying out money from the trust will not jeopardize the sanctity of the trust. Such early withdrawals happen all the time in the right circumstances. If you are thinking of having the trustee withdraw money for whatever reason, you might want to discuss this with our office first.
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Until next time…
peace, health and happiness,
Lawrence Eric Davidow