Unlimited Duration Trusts - Minnesota CLE

Possible Answers for
Both Estate and Asset Protection Issues
- Adding the Grantor as a Future Beneficiary of Self-Settled Dynasty
Trust?:
• Key trust protector power for third party and/or self-settled trusts:
– Power to add and remove beneficiaries
– Grantor? Grantor’s spouse?
– Class of grandparent’s descendents - Example: This class may be defined: “x’s [grantor’s grandparent’s]
descendants.”
– Caution: Toggling grantor trust status on or off
– IRC Section 2035 – Coordinates with 2036(a)(1) so, if trust protector can remove grantor as beneficiary
within three years of death
• Consider only adding grantor as a beneficiary based upon status of the spouse:
– Spouse named as initial beneficiary:
• Utilize floating spouse: “My “spouse” means the person, if any, who is married to and not living separate and
apart from that person (other than for medical reasons), or who satisfied these requirements at that person’s death
and has not remarried.”
– Grantor later added as a beneficiary upon spouse’s death or upon divorce
• Grantor becomes beneficiary after term of years:
• 10 years – Avoids 10 year clawback if grantor goes through bankruptcy
• 5 years
• Grantor sells assets to self-settled trust for a promissory note.
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